What You Need to Know about the MLP Sector

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What You Need to Know about the MLP Sector PART 1 OF 10

Why the MLP Sector Was Weak in February

MLPs in February 2017

MLPs (master limited partnerships) ended their three-month winning streak with a slight decline in February 2017. On average, MLPs fell 2% in February 2017. At the same time, the Alerian MLP Index (AMZ), a capital-weighted index tracking the performance of 50 energy infrastructure MLPs, fell 0.6%. The index is still trading 40.2% below the highs it touched before the rout in energy prices.

Why the MLP Sector Was Weak in February

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MLPs, which mostly comprise energy and natural resource companies, had a good start to 2017. AMZ was up 4.2% in January 2017. This was partially driven by a slight recovery in drilling activity due to upward movement in commodity prices and a few positive announcements by the federal government after Donald Trump assumed office.

The decline in AMZ during February could be attributed to weak performance from liquid transportation and storage MLP subgroups. We’ll look into the performance of MLPs by subgroup in the next article.

MLPs versus the S&P 500

MLPs underperformed the S&P 500 (GSPC)(SPX-INDEX) by 530 basis points in February, and also underperformed it in terms of total returns. With a 6.8% yield, AMZ returned 5.2% in February. At the same time, the S&P 500 returned 5.8%. The Alerian MLP ETF (AMLP) and the SPDR S&P 500 ETF (SPY) track the performance of AMZ and GSPC, respectively. The S&P 500 rallied for almost all of February on investor expectations of business-friendly policies and regulations under the new government.

Series overview

In this series, we’ll analyze MLPs’ recent performance in detail. We’ll review MLP subgroups’ performance, top MLP gainers and losers, and MLP funds. Finally, we’ll look at the best MLP picks for 2017 based on Wall Street analysts’ estimates.


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