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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
By Adam Fischbaum
NEW YORK (
StreetAuthority) -- Back in April, I
wrote a piece
about taking profits on some of the energy master limited partnerships or MLPs.
How have things turned out since? Two of the names I discussed,
Kinder Morgan Energy(KMP) and
Navios Maritime Partners(NMM) are textbook examples of how bipolar markets can be. Kinder Morgan is slightly up (exclusive of income) by about 4%, while Navios has lost almost 27%. Even with the yield, investors are still behind the eight ball.
But how have energy MLP's as a whole performed this year? Again, it's, at best, a mixed bag.
The best benchmark for energy MLP's is the
Alerian MLP Index(AMZ). From the index high shortly after publication to the present, the index is off less than 4%. Not a big deal. But in early August, the Alerian MLP Index was off more than 19% from the same level.
Many widely held MLP names, such as the aforementioned KMP and perennial investor favorite
ONEOK Partners(OKS - Get Report), have held their ground or appreciated nicely. So while some value was created briefly during the white-knuckled summer the markets experienced, it would appear that things have returned to normal in MLP land. Are there any opportunities? Yes, especially in the much-hated coal fields and the nation's seemingly limitless natural gas supply.
Opportunity in Coal
There's plenty of coal in the United States. It's cheap, and we've been using it for centuries. But it's dirty. As an energy source, however, it's not going away tomorrow.
While many energy MLP prices have held steady most of this year, many of the coal MLPs have been banged up like a screen door in a hurricane. Coal prices have been cut nearly in half since their 2008 peak spot price of about $150 a ton. Since then, prices have been wallowing at the $80 level this year.
It's funny. I've always noticed that MLP price volatility mirrors price volatility of the commodity stored or transported, especially the oil pipeline and storage companies. Ironically, the actual price of oil has little to do with the revenue of the MLP. The pipeline guys are basically a railroad. They get paid to move the product. Granted, demand will affect the volume of stuff they have to transport, but the price of the product really shouldn't matter much. But stock prices are not rational beings.