The best-performing Dow Jones industry group year-to-date has been the pipeline operators. The DJ Pipeline Index is up 25% since January 1. Its closest competition comes from the Integrated Oil names which are up 16%.
In comparison, the S&P 500, Nasdaq 100 and Dow Jones Industrials are all up exactly 5%. My theory for this pipeline outperformance is this: The big source of inflows for stocks in the first quarter has been yield-hungry money coming out of bonds and bond funds. The pipeline and MLP stocks are attractive to this type of money because of the 4% to 6% yields these securities offer.
This has been an ongoing trend for quarters and quarters now but it seems to have accelerated since the beginning of 2011.
You’ve seen some of these companies in the news recently as several large hedge funds have filed 13F holdings in them. See Market Folly for a post about Dan Loeb’s Third Point buying shares of El Paso ($EP).
Below is a look at the best performing pipeline stocks so far this year, not including dividends (ignore the LGOV stock, it is a China penny stock listed on the pink sheets)…