When it comes to using technical scanners to find breakout stocks or momentum names, my favorite thing is when names I've never heard of are brought to my attention. Plenty of times the list is nothing but names I know or sectors I am familiar with, but occasionally there is something that creates enough interest for me to dig and search for more information. Although I don't always find something worth buying or shorting, the education itself is often reward enough. Other times, it gives me the opportunity to find complementary or alternative investments to something I already own or trade.
While I've owned and traded master limited partnership names quite a bit over the years, I had never considered CorEnergy Infrastructure Trust (CORR). This company chose to be treated as a real estate investment trust when it comes to taxation, so not exactly the same as the traditional MLP. It is a trust that owns midstream and downstream U.S. energy infrastructure assets with a focus on triple net leasing these assets. The two major holdings are the Pinedale liquids-gathering system leased to Ultra Petroleum (UPL) and the Eastern Interconnect Project leased to Public Service Company of New Mexico, a subsidiary of PNM Resources (PNM).
Given the recent transition to REIT status, the financials are a bit jumbled, for a lack of a better word, as the company has is likely now driven by leasing revenue, so I feel it is important to point out the somewhat limited amount of financial information based on operations in this manner. Still, insiders have been making pretty steady buys here on a stock trading 6% below book value and offering out a 7.2% dividend.
While I like this name, I still prefer to pair it with something a little more diverse in the space. In the past, I've talked about using the leveraged E-Tracs holding from UBS, but the more conservative approach is the UBS E-Tracs Alerian MLP Infrastructure ETN (MLPI). The ETN offers a 4.5% distribution with top five holdings Enterprise Products Partners (EPD), Kinder Morgan Energy Partners (KMP), Plains All American Pipeline (PAA), Magellan Midstream Partners (MMP) and Energy Transfer Partners (ETP) making up about 40% of the ETN. For those not comfortable holding the monthly leveraged version of this ETN, there is actually another direction I would go rather than MLPI.
The largest closed-end fund in this sector in term of assets and one I've owned on and off for a very long time is the Kayne Anderson MLP Investment Company (KYN). As of March 31, the net asset value was $35.24 against a price of $36.09, so it's trading at a small premium. Of course, I prefer to buy at a discount, but it isn't quite as common on KYN. Actually, it is a fairly rare occurrence, so as long as the premium is only 1%-3%, I'm interested in KYN. The top holding here is Enterprise Products Partners in about the same proportion as MLPI holds, but the top five holdings only make up 32% of this CEF. Plains All American Pipeline is the only name outside of Enterprise Products Partners that hits the top five when comparing KYN and MLPI. KYN adds MarkWest Energy Partners (MWE), Williams Partners (WPZ) and Regency Energy Partners (RGP) to its top five, which I find as a nice diversity compared to MLPI. KYN offers a high 6.8% current distribution, which has been consistently increasing quarter after quarter. While there is correlation between CORR and KYN from time to time, it isn't overpowering or consistent.
For those investors looking for some yield and diversity away from a high-growth equity type of portfolio or even a heavy bond/income-oriented portfolio, I believe adding in KYN and CORR on the long side offers a nice fit.
