Energy Sector MLPs looking good

[dan_s]

Wells Fargo MLP Monthly: February 2014

Flat Is The New Up. Master Limited Partnerships (MLP) were flat in January (0% price performance as measured by the Wells Fargo Securities MLP Index), outperforming the S&P 500, which lost 3.6%. Performance was driven mainly by (1) strong natural gas and natural gas liquid (NGL) prices, and (2) solid distribution announcements, which confirm sector fundamentals, offset by the downward pressure of the overall equity market. The typical "January effect" (the best-performing month for the past 14 years) came early, in December 2013 (a gain of 1.9%, but still below the S&P 500 increase of 2.4%), as we believe MLP investors accumulated MLPs in December trying to get ahead of this yearly phenomenon.
Positive Outlook For 2014. Our outlook is supported by the following: (1) we view overall fundamentals as solid with the buildout of U.S. energy infrastructure visible for the next 2-3 years, driven by robust shale volume growth; (2) MLP valuations still screen attractive relative to other asset classes; (3) fund flow remains positive given the growth, maturation, and mainstreaming of the MLP sector; and (4) the combination of the MLP-ization of the energy sector and (conversely) consolidation could continue to drive performance.