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Finding True Value in Master Limited Partnerships

A roadmap to identifying the best investments in midstream energy.

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There's no question in our minds that there is tremendous value in midstream master limited partnerships. Stock prices have fallen roughly 50% this year, yet for the vast majority of stocks we cover cash flows and distributions have not suffered to nearly this extent. While concerns over capital market access and distribution security are real, we think fear has created some excellent opportunities. But sifting through our list of 5-star MLPs to find the right opportunity can be daunting, so we've created a short primer to guide your thinking.

First off, with numerous MLPs in 5-star territory, one needs to consider other factors beyond the star rating to find the business offering the best risk/reward profile. This may also help one consider how large to size one's investment. After all, our Consider Buying price is the point at which you should consider buying units, but "consider" implies deliberation, in our view. In addition to our fair value uncertainty ratings and fair value estimates, we suggest MLP investors weigh these factors.

Jason Stevens does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.