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December 18, 2016
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MLPs crossed back over “the 300” two more times this week, but finished on the good side and +1.2% on the week. Large cap MLPs beat smaller MLPs as evidenced by the spread between the AMZ and its equal weight cousin. Interest rates pushed higher, but yield-based equities found support while the S&P 500 traded sideways.
Oil prices bounced around, rallying on enthusiasm over the non-OPEC production reduction agreement, then fading with dollar strength and the weekly inventory report, and finally bouncing off $50/bbl to reclaim last week’s close to finish the week. Natural gas prices slammed on the brakes on an evolving weather outlook, even though inventory report Thursday indicated a very tight market.
Implications of Election and OPEC on MLPs in 2017
I recently published a paper, available over at CBREClarion.com, where I discuss what has been a steadily improving outlook for MLPs that has yet to manifest itself in stock price performance since MLPs peaked in July. The election and OPEC announcement have added to the positive outlook as we approach a fresh year. Please click here to read more.
Santa Rally
Enthusiasm for MLP prospects in 2017 may start showing up over the next few weeks. Consistently and even in years when returns have been very negative, the last 9 days of the year tend to have a positive bias. That period has been positive for 7 straight years. This is a combination of general optimism, a lack of equity issuance typically during this time, and some investors trying to beat the January effect.
Winners & Losers
The range of returns across the sector was tighter this week than last. AMID led the way, perhaps the successful bond offering was a vote of confidence in AMID’s merger with JPEP. No other news among the MLPs on this chart. Weaker natural gas prices were likely a factor in ARLP (coal producer) and CCLP (compression provider) weakness.
Year to Date Leaderboard
Very little change in the year to date winners & losers from last week. With just two weeks to go, I wouldn’t expect much movement among these large outliers, although the drop down names PSXP and SHLX have started to trade a bit better.
G.P. Holding Companies and Midstream Corporations
Median GP performance was roughly in-line with MLP performance this week (+1.4% vs. +1.2% for index). AHGP and AROC showed their sensitivity to natural gas prices, while other recent strong performers like SEMG, ETE and OKE followed through from last week’s gains.
News of the (MLP) World
Light news week for capital markets and M&A activity, but there was no shortage of interesting news items around the sector. DAPL future partners continue to work towards a successful close post easement. EPD got the Pascagoula plant back online with a few weeks to spare. And WMB elected two new board members that are very intriguing for armchair M&A speculators.
Capital Markets
Growth Projects / M&A
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