Alerian MLP ETF
The Alerian MLP ETF (AMLP) rose 1.18% in the week ended August 14. The ETF tracks an index of 25 midstream MLP companies like Plains All American Pipeline Partners (PAA), MarkWest Energy Partners (MWE), and Magellan Midstream Partners (MMP). These three companies together account for 22.42% of AMLP.
MLPs are special companies that pay most of their earnings as distributions to unit holders. To understand MLPs better, check out our Primer on MLPs. AMLP is an easy way for investors to gain low-cost, diversified exposure to the midstream sector. Midstream companies help transport, process, and store energy.
AMLP gained almost as much as the VanEck Vectors Oil Services ETF (OIH) in the week ending August 14. Read the previous parts of this series to learn more about OIH’s performance. What is interesting to note is that all the energy stock ETFs we’ve been covering in the series, which you can also see in the graph above, showed positive movements in the week despite weakness in crude oil and natural gas prices. What’s even more interesting to note is that the smallest gainer was the broad-market SPDR S&P 500 ETF (SPY), which increased just 0.71% during the week. The biggest gainer, as we saw in Part 2, was XOP, which gained 5.21% during the week.
Among AMLP’s holdings, the biggest gainers were TC Pipeline Partners (TCP), NGL Energy Partners (NGL), and DCP Midstream Partners (DPM), which gained 14.7%, 11.86%, and 10%, respectively, in the week ended August 14. All these companies combined roughly make up 5% of AMLP.
AMLP holds midstream MLPs whose earnings are typically linked to their transported volumes of energy products. Plus, many of them enter into long-term, fixed-fee contracts with their customers. This makes them more resilient to slumps in energy prices than their upstream and integrated peers.
Because investors typically buy MLPs for their regular income via distributions, MLP units are also affected by movements in interest rates. Check out our sector coverage on our Fixed Income ETFs page.
Usually, AMLP is among the safer bets for investors to play energy prices. Read What you need to know about investing in the Alerian MLP Index for additional details.