Credit Suisse lifts view of MLPs, sees 40% upside on revision to mean yield

• Credit Suisse upgrades the MLP sector to Overweight following the recent sharp selloff, saying reversion to mean yield ranges suggest a total return outlook of more than 40%.
• The firm notes that the overwhelming majority of distributions have been made, and MLPs are tracking to 7.8% Y/Y growth (excluding upstream and coal), above last year and at the high end of its 5%-8% forecast range for this year.
• Credit Suisse says its top picks in the group are Genesis Energy (NYSE:GEL), Tallgrass Energy Partners (TEP) and Energy Transfer Equity (ETE).
• The firm also says defensive names with low commodity exposure make the most sense going forward and have held up best in the current bear market, including pipeline-oriented MLPs such as Spectra Energy (NYSE:SE) and Kinder Morgan (NYSE:KMI), and the just-upgraded ONEOK Partners (OKS) and Magellan Midstream (NYSE:MMP).
• Small cap Midcoast Energy Partners (NYSE:MEP) is vastly oversold, the firm says, noting it has garnered parental support for 2.5 years.
• Also viewed favorably: WES, CNNX, ENLK, EQM, PBFX, PSXP, WNRL, VLP
• ETFs: AMLP, AMJ, KYN, MLPL, YMLP, TYG, SRV, KYE, CEM, MLPI, NML, FEN, NTG, MLPA, KMF, EMLP, FMO, MLPN, SRF, FEI, JMF, CBA, MLPG, MLPX, GMZ, EMO, MLPS, MLPY, TTP, CTR