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Energy infrastructure MLPs to bounce in 2016: Trader

The energy infrastructure sector and master limited partnership stocks are due for a bounce in 2016 after getting beaten up this year, Tortoise Capital Advisors' Rob Thummel said Monday.

Like other securities linked to the energy industry, energy infrastructure MLPs have seen valuations plunge throughout a roughly 60 percent rout in oil prices since last summer. The Alerian Energy Infrastructure ETF is down about 43 percent this year.

But Thummel noted that MLPs are currently improving cash flow, making their balance sheets look healthier. At the same time, he sees the supply-demand imbalance narrowing in 2016.

Some MLPs are also paying out attractive dividend yields, he said, so investors get paid to wait out the energy downturn. The yield on the Alerian ETF is nearly 4 percent.

"Right now, where MLPs are trading, how they've traded off, which doesn't really match up with their fundamentals, I'd be buying MLPs every day," the portfolio manager told CNBC's "Fast Money: Halftime Report."

Tortoise Capital Advisors manages $15 billion in energy-related investments.

Rob Sechan, institutional consultant at UBS Private Wealth Management, said he too sees huge value returning to energy infrastructure MLPs.

"You have valuation levels that we haven't seen since early 2009 when capital markets were virtually shut down," he told "Fast Money: Halftime Report." "It was an epic buying opportunity for the asset class."

"Today is really no different unless you suspect … energy prices are going to head down towards $20 per barrel."


"Fast Money" trader Jim Lebenthal cautioned that energy infrastructure MLPs have attracted yield-oriented and income-dependent investors, including many retirees who have low tolerance for losses.

"With this waterfall that's been picking up, you're flushing out those hands," he said. "Really, what's happening is value is being created at the expense of these folks who, in a low-interest rate environment, searched for yields."

Sechan noted that 50 percent of the asset class is owned by insiders, so the float is limited. That means when buyers return, the asset class will rise again, he said.