The past year has been a tough one for MLPs and, contrary to our expectations back in January, it actually got tougher in 2015 as buyers held out for discounts.

They got plenty of those from determined sellers, many of whom, I suspect, joined the party unfashionably late in 2013 and the first half of 2014, only to see their hopes cruelly dashed.

The Alerian MLP Index was down 11% on a total return basis including its components’ distributions between Jan. 1 and June 30, despite the fact that U.S. oil output hit a 45-year high in May.

Sellers appeared not to care about that, just as they weren’t impressed with the fact that most MLPs don’t actually deal with crude and in fact have very low direct exposure to short-term swings in energy prices.

In fact, MLPs suffered a bigger hit than large-cap energy stocks; the benchmark Energy Select Sector SPDR Fund (NYSE: XLE) was down 3.8% on a total return basis in the first half.

Our portfolios fared significantly better. The 54 securities recommended by MLP Profits in the first half of 2015 averaged a total return of 0.9%, and the Best Buys list we published on Jan. 21 averaged a total return of 7.9% between that date and June 30.


We “cheated,” of course – in the sense that not all of our recommendations were actual MLPs, consistent with our long-standing advocacy of certain MLP corporate sponsors.

And in fact it was one of  the two corporate general partners of MLPs among our 10 Best Buys that led the way, Williams (WMB) returning 41% thanks to the (promptly rejected) buyout bid by Energy Transfer Equity (NYSE: ETE). Getting to that number required selling half of the position on the day of the bid announcement, as we advised, at what has so far proven to be the stock’s high point.

Despite the nice average gain, that Best Buys list was hit-or-miss, with four winners and six losers. But the misses were modest and the hits lucrative, with ETE’s 21% return the smallest of the four and CVR Refining (NYSE: CVRR) and Delek Logistics Partners (NYSE: DKL) both delivering gains in excess of 30%.   

The results were far less happy in a Conservative Portfolio down to a half-dozen recommendations following the buyout of Oiltanking Partners by Enterprise Products Partners (NYSE: EPD).

I’d hoped these midstream giants would weather the market turmoil well given their scale, diversification and financial conservatism. Instead, they became too big not to sell, exposed to persistent fund outflows.

We’re certainly not giving up on them here with market sentiment so out of tune with their long-term prospects.     


The Growth Portfolio was nearly four times as large and fared much better, returning 1.8% on average. In addition to Williams, Delek Logistics and Energy Transfer Equity, standouts included the refinery logistics MLP Holly Energy Partners (NYSE: HEP) and the midstream general partner SemGroup (NYSE: SEMG), both recommended in the middle of last year.

DCP Midstream Partners (NYSE: DPM) was by far the biggest loser amid low natural gas liquids prices and concerns about the credit ratings of its general partner. I expect these to prove overblown over time and am somewhat encouraged by the much stronger performance of DPM’s bonds during the second quarter.


Ironically, the Aggressive Portfolio did best of all, more than doubling the return of our Growth basket. It benefited from the timely additions of three tanker fleet operators last December, which delivered the 32% return in Teekay Tankers (NYSE: TNK) as well as 19% from Scorpio Tankers (NYSE: STNG). Those gains are no less real for the fact that neither Teekay nor Scorpio calls itself an MLP. Western Refining (WNR) isn’t one either, but rather a shareholder-friendly refiner profiting from MLP affiliates.

We also benefited from the timely end of short-term speculations in a pair of upstream MLPs and from January’s recommendation of Cedar Fair (NYSE: FUN), an MLP leveraged to lower fuel prices as the operator of destination amusement parks.


The main drags on the Aggressive Portfolio’s performance were the fracking sand producer Hi-Crush Partners (NYSE: HCLP) and coal general partner Alliance Holdings (NASDAQ: AHGP), both now purged, and Boardwalk Pipeline Partners (NYSE: BWP), which is so cheap again it should bounce back eventually.

The UBS ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure Index ETN (NYSE: MLPL) fared about as badly as you’d expect a leveraged sector bet to perform when its sector is down double-digits. I fully expect a turnaround in this one as well before too long.

An average return of 0.9% over six months is nothing to crow about, of course. But given the 11% loss for the most widely tracked MLP benchmark things obviously could have gone much worse. Getting big scores from four of our Best Buys was icing on the cake. I do hope and expect the frosting to be distributed more evenly when we tally results for the full year.