Stay Away From Oil and Gas Limited Trusts

 | Dec 13, 2012 | 5:58 PM EST
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Some stocks just keep getting killed, and it's gut-wrenching to watch. The worst? The oil and gas limited trusts and the master limited partnerships.

As usual, when it comes to Washington, people are just presuming the worst. They are betting that, if the government can suddenly turn its attention to municipal bond limitations, cutting back the exemption on the tax-free interest, then they can go after the MLPs, too, perhaps making them pay corporate taxes.

So these stocks just get hit in waves, punctuated by their insatiable demand for capital and the multitudinous secondaries to slake that demand.

That's why I am thinking that no one should buy these for now except on secondaries because the companies are probably as jittery as the market is. The secondaries still work for the good ones, like MarkWest Energy Partners (MWE), although they are abject failures for the bad ones, like the one the Action Alerts PLUS charitable trust is in, Energy Transfer Partners (ETP).

MarkWest bounced nicely after the pricing of its last secondary at $46.5, a great opportunity. Similarly I think that Kinder Morgan Energy Partners' (KMP) secondary at $78.60 is one that worked well and shows you how it is worth waiting for even the best of breed.

It does seem that every time we have tax uncertainty in Washington, we get these kinds of selloffs. It's the price you have to pay to own them. So only buy them on a discount. Otherwise, just take a pass.

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