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August 26, 2012

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Week Thoughts: MLPs Lose Steam as Broader Market Turns

The S&P 500 finally broke lower this week, after 6 straight positive weeks.  It seems that we are reaching the upper limit of the market’s range absent the stimulus the markets keeps trying to price in.  Friday the market turned positive after some hopeful musings by Big Ben, something about there being scope for further Fed action to ease things.  We’ll see how long that lasts next week.

In energy markets, while oil prices held up well last week and continues to drift higher this summer, natural gas dropped again and is now down 5 straight weeks.  Also down big this week were propane (-13.7%) and ethane (-9.7%).  MLPs were down 1.3% this week on no news of consequence.  The Alerian MLP Index was up on Monday and down each day after that this week.  The market’s late uptick on Friday didn’t bleed into the MLP space.

For the year, MLPs are still trailing the S&P 500, and variable distribution MLPs still lead both by a wide margin.  Natural gas, which was almost even for the year 5 weeks ago, is back down 9.6% for the year, while oil continue to creep towards breakeven and towards $100 per barrel.

Winners & Losers

EVEP was the big winner this week, up 8.4% on the latest information out of Enervest on how their Utica wells are doing.  NRGY was the second biggest winner this week up 6.5% after Monday’s buyback announcement, a very rare one indeed for an industry that typically pays out most of its available, rather than spend it to boost its stock price.  It has worked so far, however, and like I’ve said before, NRGY management is willing to make whatever moves necessary to fix its unit price problem. EROC continued its upward climb as well this week, and is now up 8.7% since August 13th.

On the downside, FGP was a big loser this week, down 9.9% on no news. Likewise, BPL continues its downward slide, approaching its 52 week low of $46.61 per unit on June 4.  STON actually did hit its lowest point of the year on Friday.  BPL and STON were both in the bottom last week as well, that can’t happen 3 times in a row, can it?

For the year, BPL has fallen into the bottom 5, and EROC has popped out of it.  The top 5 constituents remain the same as last week, but CLMT moved up 2 spaces to 2nd on the year.

It will be a very quiet week this week for MLP deals.  It will be a chance for everyone (like me) to catch up on reading and other things we’ve been neglecting. I for one am planning to get my Texas drivers license and to take my daughter to her first day of public school.  Unlike Rodney Dangerfield and Billy Madison, however, I am done with school and academic decathlons….what is everyone else doing this week?

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