Midstream has continued to rally this year on strong demand and high energy prices
The enthusiasm for midstream investments has yet to subside, and with bountiful growth opportunities ahead, the momentum is likely to continue. The Alerian MLP ETF (AMLP) took in $97 million in net inflows in May, bringing the year-to-date tally up to $651 million in inflows. The fund has $6.9 billion in assets under management.
AMLP is up nearly 34% year to date on a total-return basis, according to Y-Charts, and still has room to run. Energy has rallied significantly since the end of 2020, but that performance is off a low base, given years of weakness even before the pandemic roiled energy markets, according to Stacey Morris, CFA, head of energy research at VettaFi.
Assuming current macro trends continue (inflation, rising interest rates, a preference for value over growth) these should all continue to bode well for energy stocks, including midstream, Morris said.
In mid-May 2019, the Alerian MLP Infrastructure Index (AMZI), which is tracked by AMLP, was trading at 9.9x on a forward EV/EBITDA basis, compared to a forward EV/EBITDA multiple of 8.9x at the end of April 2022, according to Morris.
For investors worried if they’re too late, the current valuations and outlook for the space suggest now is still an ideal buying opportunity.
For more news, information, and strategy, visit the Energy Infrastructure Channel.
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