11/16/12: The Smell of Fear and Opportunity
Master limited partnerships (MLP) haven’t been spared the carnage, partly on concern they’ll lose their tax advantages as well. The result is closed-end Cushing MLP Total Return Fund (NYSE: SRV)–which owns a diversified basket of mostly energy midstream MLPs–now yields more than 12 percent. Meanwhile, its premium to net asset value (NAV)–which has averaged 25 percent over the past year–is down to about 5 percent.
The fund’s monthly distribution is well protected, covered by the distributions of the MLPs it owns by better than a 1.1-to-1 ratio after fund expenses.
Our bet for the next 12 months is the distribution will hold and the fund’s price will head back toward USD10 per unit, giving us a total return of around 50 percent. Buy Cushing MLP Total Return at or below USD8.
We’re also closing out four positions this month, CSR Ltd (ASX: CSR, OTC: CSRLF), Data Group Inc (TSX: DGI, OTC: DGIPF), France Telecom SA (France: FTE, NYSE: FTE) and Superior Plus Corp (TSX: SPB, OTC: SUUIF).For more on Cushing MLP Total Return and the closed positions see this month’s issue of Big Yield Hunting.
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