COTW: Contrarian Opportunities in MLPs

November 6, 2017

The chart below can be downloaded here.

 

Let’s go back to October 2014: Flows into Master Limited Partnership (MLP) funds have averaged over $1BN/month for the past 12 months, WTI crude is trading over $80/barrel, MLP yields are 4.1%, price-earnings ratios are 37x & yield spreads over Treasuries are just 200bps. With the benefit of hindsight, not a great time to be putting money to work in a capital intensive industry with high debt leverage & often poor corporate governance.

 

Fast forward to today: Inflows have turned into net outflows, crude is at $56/barrel, MLP yields are over 7.5%, PEs are in the low 20s & yield spreads over Treasuries are 530bps. More importantly, we believe the current pricing environment will result in better corporate governance & more sustainable business models. We think now is a better time to look at MLPs.

 

 

IMPORTANT DISCLOSURES

SpringTide Partners, LLC is a Registered Investment Advisor with the state of Illinois and other states jurisdictions where required. Registration with the SEC or any state securities authority does not imply a certain level of skill or training. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. All investing carries risk including risk of principal loss. All statements made on this website are opinions of SpringTide Partners, LLC and are subject to change. SpringTide Partners, LLC assumes no responsibility towards the accuracy of the data included. Statements made on website shall not constitute investment advice.

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