Seeking Alpha

Barclays investigates possible overvaluation in MLPs and thinks “the sector does not...

Barclays investigates possible overvaluation in MLPs and thinks “the sector does not screen as cheap and will widen if the market gives up recent gains," advising investors who are overweight in EPD, PAA and KMI to moderate their positions. It's OK to add to ETB, EPB and DPM, the firm says, but reduce exposure to BPL, EEP and BWP.
Comments (25)
  • After the collusion on LIBOR to set rates, Barclay's should have no standing or credibility to opine on any subject. They are tainted.
    11 Oct 2012, 07:31 PM Reply Like
  • Yup. Sounds like they missed the boat on these wonderful investments are probably trying to get an entry point now LOL
    11 Oct 2012, 07:40 PM Reply Like
  • So they publish that they "investigate a possible overvaluation"? Give me a break. Maybe they should research a bit longer and figure out whether the sector is overvalued or not.
    11 Oct 2012, 07:47 PM Reply Like
  • Was there any reason given on why to "reduce exposure to BPL, EEP and BWP"?
    11 Oct 2012, 08:11 PM Reply Like
  • Seems to me there's NEVER any reasons given by any of the geniuses whether it be underperform, overperform, market perform, buy, sell, hold or dump. These guys should be required to list their reasons on ANY opinions. We should give no credence without a list of "whys".
    11 Oct 2012, 09:15 PM Reply Like
  • Theyre fair valued to most and overvalued to others. Too pricey in my book. Good investments though. At least, most of the pipelines.
    11 Oct 2012, 08:55 PM Reply Like
  • Pretty sure that Barclays note is referring to debt, not the common units....
    11 Oct 2012, 09:10 PM Reply Like
  • I agree with Mike.


    However, MLPs have done fairly well in the current environment because they are dividend vehicles. And, these are mostly midstream cash-cows.


    This is a classic flight to safety during a time of low interest rates and a crazy energy markets. I wouldn't trust Barclays on this at all.
    11 Oct 2012, 10:50 PM Reply Like
  • My point was that there are a lot of people reading and commenting on this, but its under an inaccurate headline.
    11 Oct 2012, 11:49 PM Reply Like
  • Mike is right. The subject of the story is credit paper, not the equities. The SA bot is in error listing the story under the ticker symbols.
    12 Oct 2012, 01:18 AM Reply Like
  • I know. I was just pointing out that MLPs have seen valuation gains for a reason (from a common unit perspective).


    Also, their paper is good because they have tangible, reliable, cash producing assets. You know like real things, instead of some dweeb fresh out of yale in a Manhattan basement dreaming up intangible financial pie-in-the-sky products.
    12 Oct 2012, 10:19 AM Reply Like
  • I too agree. I know PAA is firing on all cylinders & no reasons werfe given to moderate the position. I have test driven PAA for sometime & I am very comfortable holding it.
    12 Oct 2012, 07:00 PM Reply Like
  • Um, this was Barclay's credit research, not equity research.
    12 Oct 2012, 01:25 AM Reply Like
  • Well, they are advising investors who are overweight to dump some shares on the assumption that if the market gives up some gains, the MLP's will be exposed. But then where would those investors in MLP's go in that event. I don't see much of a flight to safety if that were to occurr. Considering the decent div. returns, I would think it would behoove those investors to hold and ride out the dip. No return to speak of in cash and no less risk in other equities that I can see. So where exactly does Barclay want those investors to moderate to? Dump the MPL and buy what? Not a very informative article.
    12 Oct 2012, 06:38 AM Reply Like
  • Barclays is advising investor to dump MLP debt, not MLP shares. This article is very misleading.
    12 Oct 2012, 08:57 AM Reply Like
  • ETB is Eaton Vance Tax Managed Buy Write Income Fund. Does someone mean ETP? Help!
    12 Oct 2012, 01:38 AM Reply Like
  • Adding to ETP on valuation would make sense.
    12 Oct 2012, 07:45 AM Reply Like
  • I will continue to take my 7.9% yield from BWP while the stock market crashes. You may want to do the same
    12 Oct 2012, 10:47 AM Reply Like
  • Help! My former broker put my MLP's in my IRA account; this was the account with his fees. What happens when I "draw down" from the IRA when required. MLP dividends are distributions, now it appears they will be taxed. Any answers from experience?
    12 Oct 2012, 01:40 PM Reply Like
  • I believe that when you take a distribution from your IRA that money is taxed at ordinary income rates. MLP distributions are not taxable income when received in a taxable account, your share of the profits (if any) are what is taxed (when held in a taxable account).


    By holding MLP units in an IRA I suppose you avoid possible tax from the partnership, however, most of my MLPs generate taxable losses due to the heavy depreciation charges so it has never been a big deal.


    I hold all my MLPs in taxable accounts and in my Roth IRA I hold securities that generate cash that would otherwise be taxable, like NLY. That way I avoid ever paying tax on those gains and income.


    You may want to consult your tax advisor on your current strategy of holding MLPs in an IRA, you may also want to discuss the topic with an estate planner. Under current practice if you happen to die, I believe your investments reset to market which in the case of an MLP would be a big advantage as the basis in the partnership would be reset to market on the date of death. Thus giving your heir a big tax benefit as distributions would be shielded from tax that much longer.
    12 Oct 2012, 07:13 PM Reply Like
  • Thanks, TG
    20 Oct 2012, 03:17 PM Reply Like
  • My former broker put my MLP's in an IRA, stated it didn't make a difference. If dividends are distributions, not taxable, when I "draw down" my IRA, won't these accumulated dividends be taxable as the other funds in my IRA? Anyone have any experience with this problem?
    12 Oct 2012, 01:51 PM Reply Like
  • I really hope people listen to Barclays and sell KMI, KMP, and KMR. If they drive the price down, I can buy more cheaper.


    Maybe, that is what Barclays wants to do too.
    12 Oct 2012, 01:52 PM Reply Like
  • I've bought and sold many MLP units held in a Traditional IRA account for 10 years without any tax implications. You pay regular income tax on distributions from the account.
    12 Oct 2012, 04:17 PM Reply Like
  • Does anyone know why BLP is taking a bigger hit than other MLP's?
    Time to sell or stay put with the high dividend?
    20 Oct 2012, 03:17 PM Reply Like
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