A Deeper Look At The High-Yield MLP ETF Space (AMLP)

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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 (iPath S&P GSCI Crude Oil Total Return Index ETN, Expense Ratio 0.75%, $625 million in AUM) and USO (U.S. Oil Fund, 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, having debuted back in August of 2010 and celebrating its seventh year of live trading performance in about a month, AMLP (Alerian MLP ETF, Expense Ratio 1.42%). Like Crude Oil prices themselves, 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 (JPMorgan Alerian MLP Index ETN, Expense Ratio 0.85%) currently holding $3.5 billion in AUM. Other notables in this space in terms of asset size include MLPI (E-TRACS Alerian MLP Infrastructure Index ETF, Expense Ratio 0.85%, $2.3 billion in AUM and MLPA (Global X MLP ETF, 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 upon the following names: EPD, MMP, ETP, PAA, WPZ, MPLX, BPL, WES, EQM, TLLP.

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The Alerian MLP ETF (NYSE:AMLP) 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.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.