It’s Time to Bargain Hunt in the Midstream MLP Space

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It’s Time to Bargain Hunt in the Midstream MLP Space

Petroleum is a source for refined fuels used for cooking, driving, and flying. It’s feedstock for chemical products, including lubricants, plastics, and pharmaceuticals.

And it’s a global force that’s dictated many of the proxy battles of the 20th century Cold War and still defines regional and international conflicts to this day.

Hydrocarbons are ubiquitous.

So as routs go, the one we witnessed in the global crude oil market beginning in mid-2014 was a pretty big deal.

The per barrel price of West Texas Intermediate crude slid from north of $100 in late June 2014 to about $26 in mid-January 2016, a decline of more than 75%.

Anyone with exposure to oil stocks was hit hard.

There was one segment of the energy market that was thought to be relatively safe – tax-advantaged master limited partnerships (MLP).

That proved not to be the case.

Of course exploration and production MLPs suffered along with traditional E&Ps organized as corporations.

But midstream MLPs – those that provided services such as transportation and storage of E&Ps’ output on a contract basis – were thought to be even more immune from the downturn.

No such luck.

E&P MLPs are still hurting, including overleveraged outfits such as Linn Energy LLC (LINE).

But with oil prices making a bit of recovery off the January lows, there are high-quality bargains to be found in the midstream MLP space.

That’s according to Wall Street Daily Global Markets Analyst Martin Hutchinson and his piece MLPs Looking Better with Oil in the $40s.

“The stabilization in the oil market also stabilizes their finances, and there are some attractive yields available.”

Risk remains elevated. But “modestly valued companies with good dividend coverage offer something of a haven for income investors.”

Good investing,

David Dittman

P.S. Global central bankers continue to make easy monetary policy as they struggle with the aftermath of the last crisis.

But the favorable volatility of this “Currency Cold War” creates huge opportunities for well-informed investors.

And Wall Street Daily Global Markets Analyst Martin Hutchinson is identifying these opportunities.

We’re taking a “currency skim” that’s seen a recent recommendation post a 35% gain in two and a half months.

And his April “Currency Stock” is up more than 8.0% in five weeks versus 0.3% for the S&P 500 Index.

Click here to learn more about Currency & Capital… and to invest alongside one of the world’s top experts on geopolitics and macroeconomics.

Around WSD

Chief Technical Analyst Jonathan Rodriguez identifies the major force that had been driving the post-crisis bull market.

But a rough first-quarter earnings reporting season has only added to tech stocks’ recent woes. The Nasdaq Composite is down about 1% in 2016.

Worry not, because “amid the richly valued tech sector,” Jonathan has found “an incredible value stock making big moves this year.”

Valuation metrics are impressive. But Jonathan’s stock-in-trade is technical analysis. And the chart of this value stock “reveals an even more compelling opportunity.”

Chief Income Analyst Alan Gula suffers fools lightly.

And he has time only to label former Minneapolis Fed president and current University of Rochester economics professor Narayana Kocherlakota’s recently Bloomberg View column advocating for increased issuance of U.S. Treasury securities what it really is.

That is, a bunch of tail-covering malarkey.

Yes, there is significant global demand for risk-free assets. No, the federal government should not increase its debt load.

The Fed could, however, sell some its U.S. Treasury holdings off its balance sheet.

Chief Technology Analyst Louis Basenese checks in to update us on happenings in that great bastion of U.S. innovation, Silicon Valley.

Alas, “Not a single tech company went public” during the first quarter of 2016. That’s just the fourth time that’s ever happened.

Lou identifies three key factors for the tech IPO drought, using three charts to illustrate it.

Here’s the bottom line for Silicon Valley “unicorns”: “They’re getting cut off from private market capital, yet their business fundamentals aren’t strong enough to justify the current valuations in the public markets.”

Finally, Senior Analyst Greg Miller drops a dispatch from the frontlines of the “sharing economy” in the aftermath of a vote by citizens of Austin, Texas, to deny Uber and Lyft exemptions from the city’s taxi regulations.

So there is some pushback against “disruption on the roads.”

“One of America’s most tech-forward cities,” Greg writes, “has snubbed disruptive innovation from companies that would change the taxi industry.”

Greg also highlights three lessons Uber and Lyft can learn from this weirdness in Austin.

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By David Dittman