Issues

The 2011-12 winter that never was has depressed US natural gas prices to record lows. This issue analyzes the extent to which this challenging business environment will affect long-haul pipelines, gathering and processing operations, storage facilities and upstream operators. We also review the first batch of quarterly earnings from our Portfolio holdings.

With many of our favorite MLPs trading above our buy targets, investors sitting on sizable gains should consider taking some money off the table and allocating the proceeds to names that offer better value. Newly listed MLPs sometimes offer investors an opportunity to establish positions in high-quality names before the herd bids up the stock price. However, investors must closely scrutinize these MLPs and spin-offs to make sure they're worthwhile, particularly as owners seek to take advantage of investors' enthusiasm for high-yielding fare to monetize less-attractive assets.

There’s no denying the appeal of master limited partnerships (MLP) to income-seeking investors, particularly in this low-yield environment. Relative to the yields offered by traditional fixed-income investments, the Alerian MLP Index’s 5.56 percent yield appears downright magnanimous. At the same time, the yield offered by the MLP benchmark has tumbled from its 12-month high of 7.39 percent (hit on Aug. 8, 2011) after gaining almost 15 percent. Although investors who were along for the ride will be pleased by these gains, those looking to add money to the group may be disappointed by prevailing yields. Stay disciplined and adhere to our buy targets.

In this issue, we dig into the quarterly results from the three Portfolio holdings that have reported fourth-quarter earnings thus far and evaluate the latest batch of initial public offerings in the MLP space.

We look back on the year that was and look forward to what's to come for our favorite energy-related master limited partnerships.

The recent draftissued by the US Environmental Protection Agency may link hydraulic fracturing to groundwater contzmination, but the study is riven with internal inconsistencies and doesn't reflect the situation in the nation's prolific shale oil and gas plays. Don't expect the findings to lead to restrictive regulations on fracturing, especially in the current economic and political climate.

Buying only the highest yielding master MLPs without understanding their underlying businesses and future prospects is a recipe for disaster. Instead, focus on MLPs that will grow their distributions over time.

The Alerian MLP Index has rallied sharply since early October and outperformed the S&P 500 in November, fueled by the group's growing reputation for defensive growth and solid third-quarter results.

The bull market for energy-related master limited partnerships still has legs.

Although the Alerian MLP Index has rebounded substantially since the end of the third quarter, the group continues to trade at a favorable valuation.