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April 13, 2012

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MLP Winners & Losers: "Old Timer's" Week for Coal Stocks

Like a retired professional baseball player coming back to the stadium for an old timer’s game, old King Coal came back for a week of glory.  Analyst reports and the media have been trying to call the bottom for coal companies, and this week all that noise combined with record export levels released by the EIA to send coal stocks higher.  ANR, highlighted by Barron’s last week, was up 10.3% this week.  Coal MLPs did well also, with RNO up 6.7%, ARLP up 2.7%, NRP up 1.6%, and PVR up 14.4% (although that had a lot to do with their transformative $1 billion Marcellus midstream acquisition).
I don’t see coal as having just bottomed, rather coal stocks are experiencing a temporary boost from value investors, on their way further down.  Coal MLPs remain on average down 16.3% for the year.  If natural gas remains below $4 for the next few years and if Obama remains in the white house, domestic coal mining fundamental will continue to deteriorate.  But this week, we celebrate coal and remember a day when coal accounted for 52%+ of this country’s electricity generation needs (around 40% today).
Anyway, below is the Winners and Losers chart for the week.  $QRE’s primary and secondary equity offering pushed its units 9.0% lower, but with the sponsor’s equity overhang eliminated (until the subordinated units convert), expect it to trade better in coming weeks.  Weak oil and natural gas prices likely had something to do with drops from BBEP, LRE and APL (lots of dry gas exposure, and percent of proceeds contracts).

MLPs overall had a better week than most stocks (including AAPL, which was down 4.5% this week and five days in a row).  Royalty trusts dropped along with oil and gas prices.  Terra Nitrogen was up 12.3% this week, sending variable distribution MLPs higher.

For the year, coal and propane MLPs still dominate the losers.  Winners are unique MLPs like CLMT and CQP, and other small cap MLPs that are volatile and were undervalued at the beginning of the year.

MLPs are catching up to the S&P 500 slowly.  Another 8-9 weeks in a row like this and MLPs will catch the S&P 500, but this week could be the start of a run like that, as lower interest rates and volatility spur interest in MLPs like last year.

Week thoughts post tomorrow or Sunday, enjoy the weekend everyone.

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