"Master limited partnerships have been among the market’s most stable and reliable groups; but 2008 was a painful exception, with the benchmark index down nearly 37%, the worst performance in its 13-year history," says Elliott Gue.
In Personal Finance he now sees a "great opportunity" for investors to takes positions in this high-yielding sector. Here's a trio of favorite investment plays in the MLP arena.
"MLPs have been heavily owned by institutional investors in recent years, and many were forced to sell off their portfolios piecemeal to raise cash and pay down leverage.
"This cash-motivated, fearful selling powered several selling waves in the Alerian MLP Index. This presents investors with a great opportunity to buy into a sector that’s been hit mainly by cash-motivated selling pressure, not a deterioration in fundamentals.
"There’s a good fundamental reason for MLPs’ defensive characteristics: Most are involved in the midstream energy business which typically has little or no real exposure to commodity prices. For example, the most common assets owned by MLPs are oil and gas pipelines.
"The bottom line: The pipeline transportation business offers steady, dependable cash flows that don’t change based on commodity prices. This is one of the steadiest, most cash-flow-positive businesses you'll encounter.
"Enterprise Products Partners (NYSE: EPD) is one of the largest and oldest MLPs in the US. It owns pipelines, processing facilities and production platforms in the Gulf of Mexico, among other assets.
"Enterprise has an impressive history of growing its distributions -- raising it 27 of the past 39 quarters -- and has never once cut its payout.
"The MLP has more than $2.2 billion in new construction projects due to be completed and go into service in 2009. These will be almost immediately accretive to Enterprise’s cash flows, as they’re backed by long-term commitments by energy industry giants.
"Right now, Enterprise has more than $1.6 billion in liquidity; the MLP has cut capital spending to the point that it won’t need to access credit markets this year.
