Crude oil has been one of the most volatile commodities in the very short term, with prices rallying in “V-shaped” fashion since the end of June to present levels, all but erasing any losses that occurred during that month.
The largest crude-oil tracking ETPs such as OIL (Expense Ratio 0.75%, $625 million in AUM) and USO (Expense Ratio 0.77%, $2.6 billion in AUM) are trading at breakout levels at the moment, and tenuously above their 50-day MAs, but both funds were turned back sharply on these levels just three trading sessions ago as Crude Oil prices themselves were hit pretty hard before today’s rebound.
Volatility in this segment will likely not go away anytime soon, considering the headline risk that has become all too familiar concerning the Middle East, Russia, China, and so on. On this note, some stocks that carry this potential volatility that Crude Oil prices send gyrating through markets are in the MLP space, and this a robust segment of the ETF market that we like to cover periodically here.
The largest fund in the space is likely a household name by now with $10.1 billion in AUM. AMLP debuted back in August of 2010 and celebrates its seventh year of live trading in about a month (Alerian Expense Ratio 1.42%). Like crude oil prices, this and other funds in the MLP space literally took a dive throughout the month of June on margin pressure in the space and high supply only to rebound sharply into July and to present levels.
AMLP is currently sandwiched in between its 200 and 50 day MAs, and the next several weeks may be pivotal in terms of establishing any kind of longer term direction in the MLP space as the Bulls and Bears continue their game of “tug of war” here.
AMLP is the largest MLP based ETP in the U.S. listed universe by quite a margin, with the next largest fund, an ETN known as AMJ (Expense Ratio 0.85%) currently holding $3.5 billion in AUM. Other notables in this space in terms of asset size include MLPI (Expense Ratio 0.85%, $2.3 billion in AUM and MLPA (Expense Ratio 0.47%, $614 million in AUM).
There are twenty-three ETF and ETN products listed in the greater MLP space in general, and as one might expect, there is a bit of a drop-off in terms of fund/asset sizes after the aforementioned funds, with some of the strategies being relatively new to the space if not simply under-recognized presently.
MLP companies themselves, for the mainstream investor whom may only peripherally understand the space should understand, as AMLP fund literature points out, that “Thematically, MLPs represent an investment in the build-out of U.S. energy infrastructure over the next few decades. MLPs own, operate, and build energy infrastructure assets such as pipelines, storage facilities, and processing plants.” Furthermore, Alerian illustrates that “Income potential MLPs pay out the majority of their operating cash flow as quarterly dividends” and this no doubt was one of the main triggers of interest in all of the launching of MLP based ETFs in the first place, the investor’s pursuit of yield. Whom are some of the largest MLP companies and major players in this potentially volatile space? Most of these companies fall within the “Large Cap” and “Mid-Cap” realm and surprisingly many are not household names but rather often seen as simply part of the greater “MLP basket,” which makes ETF investing in this space very appealing instead of one-off stock picking.
One cannot talk about MLP ETFs without touching on the following names: EPD, MMP, ETP, PAA, WPZ, MPLX, BPL, WES, EQM, TLLP.
The Alerian MLP ETF was trading at $12.00 per share on Tuesday morning, up $0.04 (+0.33%). Year-to-date, AMLP has declined -1.40%, versus a 11.85% rise in the benchmark S&P 500 index during the same period.
AMLP currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #5 of 23 ETFs in the MLP ETFs category.