Energy Prospectus

In your Income portfolio you make no mention of ETE, ETP. Do you not like them? ETP still yields over 6% and is on the buy list of many analysts.

They are both on our MLP Watch List. I like all the MLPs on our Watch List. I just picked a few for the High Yield Income Portfolio that I thought were committed to raising their distributions. Remember, I am not a midstream guy.

BBEP, LINE, MEMP and VNR are upstream MLPs (E&P companies structured as partnerships). They have more oil production than most of the upstream MLPs on our Watch List. LINE is the largest upstream MLP and 12th largest oil producer in the U.S., plus I really like the acquisition of BRY which brings a lot of exposure to oil. MEMP is my top pick among this group. They are going to report very strong growth the next two quarters.

EMES and HCLP are sand companies. Demand for frac sand is Red Hot and their gross margins on sand are incredible. Almost all of the E&P companies I follow are increase the amount of sand used to complete horizontal wells. The unit prices really flop around, so buy the dips.

MWE, PAA and SXE are midstream MLPs. I like MWE because of their exposure to the growth in the Marcellus and Utica. PAA is primarily a liquids gathering and pipeline company. PAA has publicly stated they plan to increase distributions by 10% each year, a great way to stay ahead of inflation for investors that depend on their portfolios for cash flow. SXE is a much smaller company with a focus on South Texas. I really like their recent acquisition. We recently published an updated profile on SXE. You should all read it. Based on my forecast models, all three should be raising their distributions in 2015.

For other high quality MLPs, check out our MLP Watch List. It is updated at the end of each month by one of our original SMU Interns. Matt graduated three years ago but he still updates all of our Watch Lists each month.