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Msg  22828 of 23585  at  1/28/2023 4:45:14 PM  by




A very good week for most stocks, with energy mostly trailing the rest of the market and utilities bringing up the rear. The S&P rose 2.5%; integrated energy (XLE) rose 0.8% and utilities (XLU) dropped 0.5%. Midstreams and MLPs were in the middle. AMJ rose 2.1%, and the MLPs and midstreams I track rose 1.7% (a little less on a market cap weighted basis).

The average MLP CEF rose 1.1% on an NAV basis. Even the First Trust funds, with their large allocation to utilizes, did a little better than average. Funds with a focus on traditional midstream did well, with the Clearbridge funds rising just about 2%. Most of the funds that did worse than average have exposure to both utilities and renewables. That includes KMF and TYG. But TYG’s sister fund NTG also did poorly and I thought it was more traditional in its focus.

The average discount stayed about the same for the week, so prices rose an average of 1.2%. But once again, there were weekly swings that probably don’t mean much. Looking at the First Trust funds, for example – FPL’s discount shrunk, and it was the 2nd best performing fund of the week, up 2.8%; OTOH, FEN’s discount jumped and it was the 2nd worst performing fund of the week. If you believe that discounts will revert to their average, you might be interested in FEN. In 2022, its average discount was 0.3%, and it spent a lot of time trading at a premium to NAV. Now it’s up a 10% discount. Anyway, the Clearbridge funds did well, with EMO up 3.3% and the other 2 funds a little behind. The Kayne Anderson funds and the Tortoise funds were generally tied for the worst performers of the week.

This week I’m only focusing on the Clearbridge funds. Saba continues to buy shares of CEM and EMO. I don’t understand the SEC rules, but Saba uses different SEC forms and timing to report its buys in these funds. In any event, Saba now owns about 16% of EMO and 8% of CEM and continues to buy more. Each of the Clearbridge funds announced a small increase to its dividend – 1 cent increase each quarter. They each yield around 7% or a little more. I’m surprised the payout is that small; maybe that’s part of Saba’s appeal. Saba seems to have gotten SRV to triple its payout.

Probably part of the reason the dividend is on the low side is that these funds each bought back about 1% of their outstanding shares in Q4. That’s an acceleration of the buyback program. If you add the buybacks to the dividend, you probably get a 9% overall return to shareholders during 2022. Add that to the 20% - 30% increase in price for the 3 funds during 2022, and the 1-year return was very good. The longer term return has been terrible.

If anyone is interested, each of the 3 Clearbridge funds doubled the number of ET units it owned in December. They also raised the investment in WES. Part of the money they used to make these investments came from the sale of DCP, which is being acquired.

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