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Canadian Natural Resources (CNQ) is also a Wintergreen play, and *that* is a value that cannot seem to get out of its own way (crap management?), trading not much above book.
Reply to @Sven: I'm guessing yield will be in demand for years to come, and it will eventually end as another bubble. Until then, aside from fixed income, I think MLPs will continue to do relatively well given the combination of hard assets and income.
Reply to @scott: Investing through MLP funds was frequently discussed on this board in the past. As I recalled, MLPs are complicated in taxable account for tax reporting. Don't recall all the details on the pros and cons. Can share your experience? Thanks.
Reply to @Sven: Individual MLPs (and there are some non-resource MLPs, such as Blackstone) generate a K-1, which does create a little more work at tax time. I think one or two K-1s are definitely not an issue, but there are people who invest heavily in MLPs and I think dealing with 10+ would start to get irritating.
The other irritation with K-1's is that they arrive fairly late at times; I had one that arrived practically a week before taxes were due last year. Most arrive in late Feb and through March.
The funds do not generate a K-1. In terms of closed-end funds, I particularly like Salient MLP Energy and Infrastructure (SMF), which is the one MLP fund that can hedge in multiple ways. I don't own that now - I took profits on it earlier in the year after buying it when it was trading at a substantial discount to NAV. In recent months it has been continually trading at a premium. If it were to at least get back towards no premium I'd consider it again, but given the desire for yield it may be a while before that happens.
Kenster, thanks for posting this report. I recently sold 1/3 of my postion in Cresent. For some time, I have found myself questioning why Cresent lags in returns compared to several other options. I know funds have ups and downs and I have held Cresent for many years. More and more, 2 factors have weighed on my decision:
1) Cresent holds a lot of cash. I know it’s a hedge and Romick has held a large percentage for cash in the fund for years. There were times when cash was useful and probably contributed to some level of return. Now however, cash offers no return and therefore some part of the fund is always offering 0 return.
2) Romick has for as long as I can remember stated that the fund is a “free range chicken” that can go anywhere and invest in anything. That would seem to offer endless possibilities. Yet the returns do now seem to offer that level of investment. Cresent lags VWINX over 5 years (2008 factored in) and in the recovery period after 08. I’ve heard Romick say earlier this year things like “deals in high yield are gone” yet for a 1 year return VWEHX – a conservative HY fund returned 9.20 per M* compared to FPACX 3.44. There are similar examples to other funds. Normally this would make for an argument of “apples and oranges” but that’s the point – Romick has said he can be both apple and orange and everything in between as the fund is a free range chicken.
So overall, I feel like the cash position offers 0% return and other funds with more and less flexibility are performing better. That means there are opportunities out there. Lastly, this part of the recent report caught my eye:
“We have a tendency to be appropriately fearful, when we have cause, but usually too early. We wrote of the whimsical valuations of Internet stocks in 1998-99, the perilous use of credit default swaps in 2002, irresponsible sub-prime lending in 2005, and the opacity and risk of the investment banks in 2006. We were early in each instance, and as a result, we had to accept some underperformance for a time. Presently, we’re concerned about a disastrous ending to this grand experiment of money printing and government debt proliferation. That is combined with aggressive government spending in some countries, and forced austerity in others – as if anyone ever saved his way to prosperity. We believe the reasons for our unease are sound, but we’re fairly confident that our timing will be off once again.”
That sounds to me like Romick is telling us to prepare for a period of under performance. I appreciate the heads up and I think Romick is a fine manager who may be correct over a longer period of time. But there are other managers who are finding opportunity now and there is no reason to think they will not adjust and find opportunity later when conditions change.
I hope this doesn’t come across like a rant, because I really didn’t mean it sound that way. I just think Romick is investing for a future that may or may not happen and with so many tools at his disposal, I wonder why he can’t invest for both?
Comments
The other irritation with K-1's is that they arrive fairly late at times; I had one that arrived practically a week before taxes were due last year. Most arrive in late Feb and through March.
The funds do not generate a K-1. In terms of closed-end funds, I particularly like Salient MLP Energy and Infrastructure (SMF), which is the one MLP fund that can hedge in multiple ways. I don't own that now - I took profits on it earlier in the year after buying it when it was trading at a substantial discount to NAV. In recent months it has been continually trading at a premium. If it were to at least get back towards no premium I'd consider it again, but given the desire for yield it may be a while before that happens.
Definitely do your own research.
1) Cresent holds a lot of cash. I know it’s a hedge and Romick has held a large percentage for cash in the fund for years. There were times when cash was useful and probably contributed to some level of return. Now however, cash offers no return and therefore some part of the fund is always offering 0 return.
2) Romick has for as long as I can remember stated that the fund is a “free range chicken” that can go anywhere and invest in anything. That would seem to offer endless possibilities. Yet the returns do now seem to offer that level of investment. Cresent lags VWINX over 5 years (2008 factored in) and in the recovery period after 08. I’ve heard Romick say earlier this year things like “deals in high yield are gone” yet for a 1 year return VWEHX – a conservative HY fund returned 9.20 per M* compared to FPACX 3.44. There are similar examples to other funds. Normally this would make for an argument of “apples and oranges” but that’s the point – Romick has said he can be both apple and orange and everything in between as the fund is a free range chicken.
So overall, I feel like the cash position offers 0% return and other funds with more and less flexibility are performing better. That means there are opportunities out there. Lastly, this part of the recent report caught my eye:
“We have a tendency to be appropriately fearful, when we have cause, but usually too early. We wrote of the whimsical valuations of Internet stocks in 1998-99, the perilous use of credit default swaps in 2002, irresponsible sub-prime lending in 2005, and the opacity and risk of the investment banks in 2006. We were early in each instance, and as a result, we had to accept some underperformance for a time. Presently, we’re concerned about a disastrous ending to this grand experiment of money printing and government debt proliferation. That is combined with aggressive government spending in some countries, and forced austerity in others – as if anyone ever saved his way to prosperity. We believe the reasons for our unease are sound, but we’re fairly confident that our timing will be off once again.”
That sounds to me like Romick is telling us to prepare for a period of under performance. I appreciate the heads up and I think Romick is a fine manager who may be correct over a longer period of time. But there are other managers who are finding opportunity now and there is no reason to think they will not adjust and find opportunity later when conditions change.
I hope this doesn’t come across like a rant, because I really didn’t mean it sound that way. I just think Romick is investing for a future that may or may not happen and with so many tools at his disposal, I wonder why he can’t invest for both?