Energy Share Price Destruction Continues

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If you are like me you are watching the massive drubbings that shares in energy companies have been taking over the course of the last month as the price of a barrel of oil has fallen by about $10/barrel.  As you are watching the drubbing you are saying to yourself “which of these companies is a real bargain?”  There are 21 oil and gas related master limited partnerships (MLPs) with current yields over 10%–are there some bargains in these 21?  We are guessing there are, the question is which one is a bargain?  We all know that the midstream energy companies have continued to get beat down even though most of the services they provide are on a fee basis and finances are not affected dramatically with short term movements in the price of oil and natural gas.  Does this mean there are bargains available? Well we are sure there are bargains but we have been less than successful  when picking energy MLPs so we have decided we will take a position in the Alerian MLP ETF (NTSE:AMLP).  Being a ETF we avoid the leverage that is inherent in a closed end fund (CEF) which means movements in share price are not as violent as a similar CEF.  Of course the trade off is that if energy heads higher the lift to this ETF will not benefit as much as a similar CEF–given our conservative nature we are just fine not squeezing every possible penny out of a position.

AMLP is an ETF that invests in energy infrastructure meaning that it is invested in midstream MLPs.  The list of the holdings can be found at this link.  Currently AMLP is paying a quarterly dividend of .215/share which equates to a current yield of 7.8%.  We will be taking a small position to start with buying 400 shares tomorrow at around $11.08/share.  Then we will watch and wait–if better pricing arises we will consider doubling our position.

For those looking for more excitement our MLP list by yield can be found here.  We just finished updating the distributions.


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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
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