Tag Archives: transactionname

Tortoise Capital Advisors Debuts In The U.S. With North American Pipeline ETF

Master limited partnerships (MLPs) which had put up a great show last year despite plunging oil prices saw a weak start to the year. MLPs finally had to give in to the oil price massacre. However, the weakness in the space gave many an entry point in these products, given their high level of yield. This popularity is probably attracting new issuers to come up with products focusing on this space. Most recently, Tortoise Capital Advisors has made a debut in the U.S. ETF market with a brand new product. The Tortoise North American Pipeline Fund (NYSEARCA: TPYP ) and charges 0.7% as fees. TPYP The passively managed product seeks to provide exposure to the broad North American energy pipeline sector by tracking the performance of the Tortoise North American Pipeline Index. This float-adjusted, cap-weighted index includes pipeline companies structured as corporations, limited liability companies and master limited partnerships (MLPs). The index uses proprietary, research-driven and rules-based methodologies to select its constituents. TPYP currently holds a basket of 102 stocks, with Williams Cos Inc. (NYSE: WMB ) as the top holding with 9.2% exposure, followed by Enbridge Inc (NYSE: ENB ) and Kinder Morgan Inc. (NYSE: KMI ) with 7.8% and 7.5% allocation, respectively. How Does it Fit in The Portfolio? MLPs represent an attractive investment option for income-focused investors in the current environment. In addition to high yields (~4% to 6% currently), MLPs have relatively stable cash flows and solid growth potential. Further, research suggests that there is no material correlation between interest rates and the performance of the MLPs. Moreover, energy production boom in the U.S. remains the long-term growth driver for these MLPs. Further, MLPs have low correlations with many other asset classes including equities and commodities and thus add diversification benefits to a portfolio. “We created this fund based on what we perceived as a need in the market for an ETF that not only provides access to the full universe of North American pipeline companies, but does so in a way that more fully captures the total return potential of these assets” said Jeremy Goff, Vice President at Tortoise. Investors in TPYP will not be subject to K-1 tax forms. Can TPYP Succeed? There are already quite a number of funds targeting the MLP space with the ALPS Alerian MLP ETF (NYSEARCA: AMLP ) the most popular product with an asset base of $8.4 billion and an average trading volume of more than $4.4 million shares. The fund has a dividend yield of 7.45% and is down 7% this year. Though AMLP’s expense ratio before deferred taxes is 0.85%, the gross expense ratio is currently extremely high at 8.56%. The J PMorgan Alerian MLP Index ETN (NYSEARCA: AMJ ) and the UBS ETRACS Alerian MLP Infrastructure Index ETN (NYSEARCA: MLPI ) take the next two spots with an AUM base of $4.9 billion and $2.4 billion, respectively. Both AMJ and MLPI charge 85 basis points as fees and offer an attractive yield of 5.88% and 5.33%, respectively. Thus competition is tough in the MLP space. However, if the newly launched fund “captures the total return potential of these assets” and generates better returns than the existing ones, it might see some success.

General Electric’s Asset Sales Are Creating A Natural Gas Buy With A Dividend

Summary Black Hills Corporation has announced the acquisition of SourceGas Holdings LLC from GE/Alinda Capital. The Acquisition is a continuation of GE’s selloff of assets in a broader strategy to streamline the firm. Black Hills expects the purchase to increase their customer base by 55%. That kind of increase in business is going to have real effects on their earnings per share. What’s Going On? I have written previously about General Electric’s (NYSE: GE ) continued exit from the Finance industry. Most recently, Black Hills Corporation (NYSE: BKH ) has announced its acquisition of SourceGas Holdings LLC. SourceGas is managed by GE energy Financial Services and Alinda Capital Partners. SourceGas has 4 utilities in the United States that serve over 400,000 customers in the western United States. It also has a 512-mile intrastate natural gas pipeline that operates in Colorado. SourceGas was created in 2007 when GE and Alinda Capital made a purchase from Kinder Morgan Inc. (NYSE: KMI ). What’s So Good About It? The $1.8 billion deal is a continuation of General Electric streamlining its business. I am a continued advocate that a streamlined General Electric focusing on its core strengths is going to be a great business to own. The firm will be much better situated to react to economic changes in a timely manner. This acquisition also brings a whole new investment into play. It is a sweet deal for Black Hills Corporation. The firm is no slouch to begin with. The past three years have seen growing net income, improving balance sheets, and improved cash flows. The SourceGas Holdings purchase will increase Black Hills’ customer base by 55% . The company has noted that the effective purchase price will actually be lower due to tax benefits incurred by the acquisition. This is a continuation of the progressive integration of 19 utility systems in the last 10 years. President and CEO David R. Emery spoke strongly about the acquisition strengthening the growth of Black Hills. “SourceGas is a great strategic fit, adding to our strong utility base and providing operational and financial benefits to all the customers and communities we serve. We are excited to significantly expand our presence in Colorado, Nebraska, and Wyoming, and look forward to serving customers and developing new relationships in Arkansas. The transaction continues our proven record of growth in the utility business through targeted acquisitions — over the last decade, we have successfully integrated 19 electric and natural gas systems in support of this growth strategy.” For a utility firm like Black Hills, the importance of natural gas purchases cannot be stressed enough. Natural Gas officially surpassed coal this week as the largest US electric source. The move to buy SourceGas is part of a bigger strategy for the firm to diversify its power sales due to declining wholesale volumes . Stacy Numeroff (an analyst at Bloomberg) noted that “gas utilities do not face the same threats to load growth from distributed generation as their electric counterparts.” It is very encouraging that the utility firm is working to get in on the better growth offered in gas utilities. It is also worth noting that while Black Hills has experienced declines in power sales over the past few years, their net income has increased every year since 2011 demonstrating management’s ability to react to market moves. The one concerning thing about Black Hills’ acquisition is the $720 million that will be added to their current $1.2 billion in debt. The 55% increase in their customer base seems positive enough to let this debt be acceptable, but it is still a concern. As of now, the deal is expected to be completed in early 2016. Mark Maloney (a manager at Manulife Asset Management LLC) pointed out that “Black Hills has a strong track record of accumulating small utilities over the years and they’ve been very successful.” Do You Invest? In the last seven quarters , Black Hills has had 5 earnings beats, with one miss. The question is whether or not the acquisition of SourceGas is going to have a positive effect on earnings per share. The company has stated that it will add “meaningfully” to earnings. With the SourceGas deal increasing its customer base by more than half, I don’t see how it can’t have awesome outcomes for earnings per share. It’s worth noting that 1-year earnings per share growth is already ahead of its 5-year growth rate. The P/E is right along with the Multiline Utilities average, so Black Hills is not costing you any premiums. The 1-year price target of $55.50 seems obtainable if this deal plays out. If you can stomach the debt situation, good net income, improving balance sheets and cash flows on top of the growth potential from this acquisition make for a nice future play with a 3.5% yield cherry on top. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

How To Avoid The Worst Style Mutual Funds: Q2’15 In Review

Summary The large number of mutual funds has little to do with serving your best interests. Below are three red flags you can use to avoid the worst mutual funds. The following presents the least and most expensive style mutual funds as well as the worst overall style mutual funds per our 2Q15 style ratings. Question: Why are there so many mutual funds? Answer: Mutual fund providers tend to make lots of money on each fund so they create more products to sell. The large number of mutual funds has little to do with serving investors’ best interests. Below are three red flags investors can use to avoid the worst mutual funds: 1. Inadequate Liquidity This issue is the easiest issue to avoid, and our advice is simple. Avoid all mutual funds with less than $100 million in assets. Low levels of liquidity can lead to a discrepancy between the price of the mutual fund and the underlying value of the securities it holds. Plus, low asset levels tend to mean lower volume in the mutual fund and larger bid-ask spreads. 2. High Fees Mutual funds should be cheap, but not all of them are. The first step here is to know what is cheap and expensive. To ensure you are paying at or below average fees, invest only in mutual funds with total annual costs below 1.95%, which is the average total annual cost of the 6391 U.S. equity Style mutual funds we cover. Figure 1 shows the most and least expensive style mutual funds. Empiric provides one of the most expensive mutual funds while Vanguard mutual funds are among the cheapest. Figure 1: 5 Least and Most Expensive Style Mutual Funds Sources: New Constructs, LLC and company filings Investors need not pay high fees for quality holdings. The E aton Vance Hexavest U.S. Equity Fund (MUTF: EHUIX ) earns our Very Attractive rating and has low total annual costs of only 1.22%. On the other hand, no matter how cheap a mutual fund, if it holds bad stocks, its performance will be bad. The quality of a mutual fund’s holdings matters more than its price. 3. Poor Holdings Avoiding poor holdings is by far the hardest part of avoiding bad mutual funds, but it is also the most important because a mutual fund’s performance is determined more by its holdings than its costs. Figure 2 shows the mutual funds within each style with the worst holdings or portfolio management ratings . Figure 2: Style Mutual Funds with the Worst Holdings Sources: New Constructs, LLC and company filings Northern Lights appears more often than any other providers in Figure 2, which means that they offer the most mutual funds with the worst holdings. Our overall ratings on mutual funds are based primarily on our stock ratings of their holdings. The Danger Within Buying a mutual fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on mutual fund holdings is necessary due diligence because a mutual fund’s performance is only as good as its holdings’ performance. PERFORMANCE OF MUTUAL FUND’s HOLDINGs = PERFORMANCE OF MUTUAL FUND Disclosure: David Trainer and Max Lee receive no compensation to write about any specific stock, style, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.