The recent fall off in crude oil prices has dragged energy sector stocks down as well. However, master limited partnerships and related exchange traded funds were better off in the energy space.
Last month, West Texas Intermediate crude oil prices declined over 20% while the Alerian MLP Index was down 2.2% on a price-return basis and less than 1% on a total-return basis and the Alerian Midstream Energy Select Index was up 0.5% on a total return basis, according to Alerian.
“Taking into account the ~30% decline in oil prices over the last two months, we would argue that midstream is performing in line with its defensive nature,” according to Alerian.
WTI crude hit above $76 per barrel on October 3 and has since declined more than 30% through November 30, dragging down energy stocks along the way. Meanwhile, while the midstream space has been negatively impacted, this segment of the energy sector is holding up much better than its the integrated energy counterparts.
Looking beyond the price performance of these energy sub-sectors Setting aside price performance, the Alerian MLP Index and the Alerian Midstream Energy Select have produced attractive yield returns for investors, was generating a 8.3% and 6.4% yield, respectively, as of November 30.
“We would expect midstream to be more defensive in a falling price environment, and that is holding true,” according to Alerian.