Expert Says MLP Fundamentals 'Remain Strong'
Over the past few years, Master Limited Partnerships have gained popularity and Pointe Capital Management believes that MLP fundamentals still are strong amid a volatile market.
Despite MLPs coming under fire in recent headlines due to certain economic circumstances, Pointe Capital Management (which generally focuses on Midstream MLPs) believes they present more compelling investment opportunities.
According to the firm's newsletter, MLPs and MLP-like securities hold real investment opportunity and are now selling at multiples not seen since the depths of the financial crisis. "While past performance is no guarantee of future results, PCM takes the position that midstream MLP growth should remain positive for mid to long-term investors. We have seen some distribution cuts, however, those are in the minority," the firm commented.
For investors, MLPs could be a rewarding opportunity with long-term potential.
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"Our view is that MLP stocks began trading like highly leveraged energy stocks in the latter half of 2015. This process accelerated greatly following the December 4th 2015 OPEC meeting in Vienna. Although market participants had reduced expectations from OPEC for this meeting, the disagreements among OPEC members and lack of cohesion led crude market traders to push crude oil prices in the mid $30s, from the mid $40s prior to the meeting," the firm noted.
Despite the MLP group's high correlation this year to crude price declines, Pointe Capital Management also commented that this is not the first time such an event has happened.
"While past performance is in no way a predictor of future performance, we have seen similar occurrences historically and the MLP stocks posted increases in the years following," the firm said.
Investing in MLPs such as energy companies are an attractive fit for the master limited partnership structure. These companies produce significant dividend yields.
ETP was up more than 9 percent on Tuesday. Williams was trading higher by about 4.6 percent.
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