MLPs in April 2017
MLPs continued to head south after a weak April 2017. MLPs saw a huge decline in prices during the first week of May driven by the sharp decline in crude oil prices. The decline in crude oil prices is due to a lower-than-expected decline in crude oil supplies despite recent measures by OPEC (Organization of the Petroleum Exporting Countries) to cut output. If crude oil continues to decline, it could impact drilling activity and MLP throughput volumes.
The Alerian MLP Index (^AMZ), a capital-weighted index tracking the performance of 50 energy infrastructure MLPs, fell 2.0% in April. Moreover, the index is still trading 44.0% below the highs it touched before the rout in energy prices.
MLPs rose slightly at the end of April driven by the Trump government’s proposal to cut taxes for pass-through businesses. However, these gains were not enough to offset the month’s early declines.
MLPs versus S&P 500
MLPs underperformed the S&P 500 Index (^GSPC) (SPX-INDEX) by 709 basis points in April 2017. Moreover, MLPs underperformed the S&P 500 in terms of total returns. Including a 7.2% yield, AMZ has returned 5.2% in April on a total return basis. At the same time, the S&P 500 Index has returned 11.2% on a total return basis. The Alerian MLP ETF (AMLP) and the SPDR S&P 500 ETF (SPY) track the performances of AMZ and GSPC, respectively. The S&P 500 has been rallying in the recent quarters on investor expectations of business-friendly policies and regulations under the new government.
In this series, we’ll analyze MLPs’ recent performance in detail including a review of subgroup performances and top MLP gainers and losers. Plus, we’ll look at best MLP picks for 2017 based on Wall Street analyst estimates.