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November 17, 2013
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MLPs were up this week overall (Alerian MLP Index up 1.1%), but their streak of under-performing the S&P 500 (up 1.6% to fresh highs) extended to 6 weeks. Interest rates were slightly lower week over week, presumably on the hope that Janet Yellen’s appointment could mean continued low interest rates and generally accommodating policy. Barring a big move in MLPs or a dramatic selloff by the S&P 500, this will mark the second straight year that the MLP Index under-performs the S&P 500. After a 10+ year out-performance streak, investors are probably not going to complain about a 25% total return year that under-performs.
FYI, I moved to the Philadelphia suburbs yesterday. Not sure what form this blog will take going forward, but the stated intent is for me to produce a weekly commentary on the MLP space for CBRE Clarion that is somehow integrated with this website. But don’t be alarmed if that takes a week or two to implement.
Winners & Losers
MWE’s drop this week was the most surprising and most discussed in MLP circles. MWE dropped 5.8% on the week, but it was a roller coaster dropping 10.1% Wednesday, then rallying 4.1% Friday. MWE was down on weak earnings and reduced guidance on slower ramp of Marcellus volumes, despite indications from producers in the area that production is up. Analysts were thrown off by MWE earnings, and price targets were universally reduced, but I didn’t see any ratings changes (most still rate it a buy, some with more enthusiasm than others). Most analysts believe MWE’s first mover advantage in the Northeast, large footprint, and strategy (staying out front of production growth with continuous expansion projects) will payoff in the long run.
EROC dropped 10% this week, and is now closer to $5.00/unit than $6.00/unit, following its distribution cut a few weeks ago. Not sure what can be done to salvage the situation, but I expect some kind of strategic announcement there in the coming months. XTEX continued higher this week, still climbing after the Devon combination announcement. CLMT clawed back some of its losses from last week (it was down 12%+last week), same thing with CPLP, which was down 8.25% last week.
Not pictured below, NTI (+13.1%) and ALDW (+26.4%) were both up big, driving the variable distribution MLPs on average up 5.6% week over week.
On the YTD chart, not much has changed week over week, although SMLP was replaced by EQM in the top 5, and EROC continued to creep towards the bottom.
News of the (MLP) World
Quick summary on news: there are no IPOs on the road this week, but a tiny saltwater disposal well MLP filed its initial S-1. Earnings and distribution ex-date season is pretty much over. NTI’s GP is changing hands, which drove all refining MLPs higher, and LINE’s merger passed through another gate.
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