The commodity price-sensitive master limited partnerships (MLP) in our Aggressive Portfolio began 2010 the way they ended 2009, seemingly on an endless run to higher levels.

Then, starting in early February, even the best of the bunch seemed to run out of gas. New equity issues raised some investors’ fears of dilution even as commodity prices–particularly oil–backed off. The result has not exactly been a rout. We’re still well ahead in these MLPs. In fact, all that’s really happened is prices have come back below our buy targets.

Nonetheless, judging from the questions some of you have been asking, there’s a concern that something has changed with what’s up to now been a bullish case for MLPs. Some are concerned the Obama administration is on the verge of ending MLPs’ tax advantages. Others are worried about rising interest rates or a worsening business case, should the economy hit a double-dip recession.

To answer question one, there’s nothing in the Obama budget that targets MLPs, and energy MLPs still enjoy considerable support in the Democrat-controlled Congress. In fact, there are a couple of bills going through the process that would create a new breed of MLP, one devoted to the development of alternative energy and power transmission capacity to get it to market.

What have been targeted are MLPs that are basically financial constructs that utilize “carried interest” to minimize taxes. We’ve repeatedly warned readers away from these, including the much-vaunted AllianceBernstein Holding LP (NYSE: AB). They’re clearly operating outside the intent of Congress when it set up MLPs, and those who buy them are clearly taking a huge chance.

But these are not the energy MLPs that the tax advantages were set up for. And NONE of our Portfolio MLPs are exposed to carried interest.

Second, rising interest rates have traditionally hurt all dividend-paying investments. But despite their run-up of the past year, MLPs are still cheap relative to benchmark interest rates such as the 10-year Treasury note. Moreover, like virtually every other income investment, they’re still acting much more economically sensitive than they are interest rate sensitive. That’s likely to be the case until the US economy gets a lot stronger and fears of a double-dip recession finally fade. And that means we don’t have a lot to worry about from interest rates.

We’re on our strongest ground with the business case for our MLPs. All are sound enterprises that are growing their underlying businesses both with cash flow and by issuing equity at low prices. Note that Williams Partners LP (NYSE: WPZ) has been moved to the Growth Portfolio.

These equity issues, as we’ve said, almost always trigger selling and push prices lower, as some investors adjust to the so-called “dilution.” But the cash raised has been almost invariably put to good use to finance acquisitions and construction of assets. And with the equity issued at such good rates, the cost of capital is very low, which means the assets are immediately much more profitable.

Good Businesses

That’s the virtuous cycle we’ve described in recent weeks in MLP Profits, and it continues here in February 2010. EV Energy Partners LP (NSDQ: EVEP), for example, issued 3.45 million common units this month, raising $94.5 million in cash. Those proceeds will fund the lion’s share of the company’s $151.8 million purchase of a 46.15 percent interest in 3,306 active oil and gas wells in the Appalachian Basin from Range Resources Corp (NYSE: RRC).

The acquisition, expected to close by the end of March, includes 78.8 billion cubic feet equivalent of proven reserves as well as considerable opportunities for new development. The current output is roughly 70 percent gas and 30 percent oil and the properties have a proven/developed/producing reserve life of 15 years. Further, EV’s parent EnerVest has six years of success drilling in the region.

Predictably, EV’s units immediately fell more than 10 percent after the news, but they’ve been heading higher the last several days. The MLP’s not slated to post fourth quarter and full-year 2010 earnings until March 12. But there’s no better demonstration of underlying strength than this kind of expansion. EV Energy Partners LP is a buy up to 31.

Legacy Reserves LP (NSDQ: LGCY) has also offered units in the last month, largely to support a $130 million producing property acquisition in Wyoming. The proceeds from the $95.6 million issue even in management’s words were “temporarily dilutive.” The purchase, however, is expected to be accretive, even as the MLP remains positioned “to pursue additional property acquisitions” in management’s words.

Ironically, Legacy took an even bigger hit than EV did after its announcements, with its units falling more than 20 percent in a selloff that lasted more than two weeks. Those who sold on the down days–which saw the units at barely $17 each–are no doubt very sorry now, as the MLP is again selling for more than $20, yielding over 10 percent and positioned for more gains ahead, particularly as energy prices head higher.

The LP won’t report until March 4. But here again is another solid opportunity for investors who didn’t get in the first time around to snap up shares of Legacy Reserves LP up to 21.

Linn Energy LLC (NSDQ: LINE) will report fourth-quarter and full-year 2009 numbers on February 26. But investors have plenty of reasons to be optimistic, starting with the output from major acquisitions the MLP made in the Permian and Anadarko Basin, announced in December.

After bidding the units skyward for several months, at least some investors have seemed to lose faith in Linn, driving the unit price down from the $28 range since mid-January. Units have come back some since, but investors can still pick up this fully hedged producer with its well-protected yield of nearly 10 percent.

The MLP has lost a proceeding before the Environmental Protection Agency, which will require it to “cease and desist” discharges of oil field brine in Osage County, Oklahoma. It must also remove all waste water from the flow path between its oil field production facility and the point of entry into the affected river Salt Creek.

The downside here, however, has been known for a while and should not have a major impact on profitability. Linn Energy LLC remains a buy up to 28.

Navios Maritime Partners LP (NYSE: NMM) units were another victim of investors’ “sell all MLP equity issues” mentality this month. Within a matter of days following a public offering of 3.5 million units, the units tanked from more than $17 to under $14 before stabilizing around $15.

Ironically the offering, which raised $62.4 million, was earmarked to expand the company’s fleet at a very good price. The deal also came on the heels of management’s announcement of robust fourth-quarter and full-year 2009 results, as well as a boost in Navios’ distribution to a quarterly rate of 41 cents per share, in part because of increased income expected from the expanded fleet.

Navios’ operating surplus–a key measure of profitability–rose to $12.7 million in the quarter, up 34.3 percent from year earlier levels. Revenue rose 23.5 percent, cash flow by 25.2 percent and net income by 24.7 percent, this in a year during which other shipping companies ran aground. Time charter and voyage revenue rose 18.5 percent in the quarter from year earlier levels, while the company continued to secure long-term contracts insulating cash flows from economic turmoil. Expansion capital was $34.5 million, up from zero last year–testament that business is turning around.

As investors in many of the tanker stocks know, cash flows in this business can be extremely volatile. Navios, however, has never cut a distribution as an MLP and yields nearly 11 percent. Navios Maritime Partners LP is still a buy for aggressive income investors who don’t already own it up to 17.

Regency Energy Partners LP (NSDQ: RGNC) won’t announce its fourth-quarter and full-year 2009 earnings until March 1. The MLP, however, has received one big piece of good news in advance of those numbers: a revision in its credit outlook from negative to stable by Standard & Poor’s, following the completion of the MLP’s Haynesville Expansion Project.

We certainly don’t take credit raters’ word for it when we analyze companies or MLPs, and we’ll be taking a hard look at what comes out for Regency on March 1. But a stronger credit rating does affect a company’s cost of capital, hence its ability to expand, and S&P rating change is in large part due to its assessment that “the partnership should continue to successfully execute its capital growth projects” and that “its financial ratios and distribution coverage will improve in 2010.”

Those strong fundamentals were, of course, largely ignored by the sellers who have driven the units down more than 15 percent from where they stood just a few weeks ago. But yielding nearly 9 percent, Regency Energy Partners LP is again in a place where investors can have all they want of it below our buy target of 22.

We’re not advocates of loading up on any one stock or MLP. And it bears repeating that our Aggressive Holdings are commodity price-sensitive: Their fortunes will rise and fall with the price of oil, natural gas and other commodities.

But the time to buy anything is not when it’s run up, but when others are running it down. And when commodity prices start to head higher, this is the MLP group in best shape to profit.