It was a short week with not much news, so midstream and MLPs followed the broad equity market higher. The melt-up of the broader equity market continued, supported by stimulus and optimism that permeated the markets for most of the week as areas of the country opened back up.
I still can’t get a haircut here, but from what I understand there are haircuts being done in certain areas of the country, so that’s nice.
After ripping higher for two months, AMZ has caught up with the broader AMUS index for YTD performance, each is down 30%, including dividends. AMNA outperformed this week on strength of Canadian midstream, and is only down 26.5%, including dividends. Utilities roared back this week, outpacing midstream and the market with a 6% gain.
Not much changed in the energy space week over week. We moved marginally closer to prices that would encourage more development of shale basins and a restart of the associated natural gas situation. Oil prices rallied more than 85% in May, with another 6% this week.
“You Said Crossing the Streams Was Bad”
The only notable news related to the rules on river crossings that might have the effect of delaying several pipeline projects. The 9th Circuit Court of Appeals upheld the ruling made by a Montana District Court several months ago that basically said what Egon said in the film Ghostbusters: don’t cross the streams.
The hope is that these legal challenges will eventually clear up and then pipeline developers can do what the Ghostbusters eventually did to save the day: cross the streams.
Status Update: They Did not Sell in May…
MLPs had a second straight big month, rallying 9% in May. It was the second-best May ever (2009 was slightly better). The S&P 500 had total return of 4.8% in May.
For the quarter to date, the AMZ has produced 63% total return, which is more than 3x the biggest quarterly return ever for MLPs. The collapse and rebound has been the shortest and sharpest in both directions ever for the sector.
Looking ahead, the MLP index has historically done ok relative to other months in June, averaging returns of 1.4% and a positive return hit rate of 60%. After the huge rally off the bottom, it would surprise me to see another month of returns as strong as May.
AMNA Status Update
AMNA followed up its 30% gain in April with a 7% gain in May. Very strong returns, but well off the pace of the MLP rebound. That said, the February and March drawdowns were less for AMNA than AMZ, so AMNA is still well ahead on longer time horizons.
Looking ahead, June has been better for AMNA than AMZ, with positive performance in each of the last 4 years in June (vs. 2 positive years for AMZ).
