SRV: Get over it with a DIY energy infrastructure portfolio

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Fund Description

cushing

The Cushing MLP and Infrastructure Total Return Fund (New York Stock Exchange:SRV) is a closed-end fund (the “Fund”) focused on MLP stocks. According to the Fund’s 8-K report:

Cushing ® MLP Total Return Fund is a non-diversified, closed-end investment company. The investment objective of the Fund is to earn a high total after-tax return from a combination of capital appreciation and current income. There can be no guarantee that the Fund’s investment objective will be achieved. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its net assets, plus any loans for investment purposes, in MLP investments. The Fund is listed on the New York Stock Exchange under the symbol “SRV”. The Fund is managed by Cushing ® MLP Asset Management, LP, an SEC-registered investment adviser headquartered in Dallas, Texas.”

MLPs

In the background User informationMLPs are described below:

MLPs

SRV

MLPs

SVR

The Fund lists the following characteristics of MLPs that make them attractive investments:

MLP Benefits

SVR

However, in its latest semi-annual report, the fund’s largest allocation (39%) was to large-cap diversified C-Corps, followed by Natural Gas Collectors & Processors (26.2%) and large-cap MLPs (12.1%). %).

briefcase

SRV

Assets under management (“AUM”) were approximately $87 million, according to CEF connection:

Capital Structure

CEF connection

However, the Fund uses leverage (15%) to increase the total exposure to $102 million.

Leverage

CEF connection

The annual expense rate is represented at 2.81%.

expense ratio

CEF connection

Performance

Since its inception, the fund has far underperformed the S&P 500 Index.

Performance

SVR

However, over the past year when the energy sector boomed, SRV returned 10.39% compared to the SP500TR’s loss of 13.97%.

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Performance

looking for alpha

Participation Analysis

The Fund lists the top 10 holdings below:

Main holdings

CEF connection

Source: CEF Connect

In my analysis of annual returns (completed one day before the chart above), SRV had a total return of 7.84%. The top three were Marathon Petroleum Corp. (MPC) with 77.12%, Cheniere Energy Inc. (LNG) with 66.72%, and EnLink Midstream ENLC with 53.09%. None of these companies are MLPs, although the name of the Fund is “MLP and Infrastructure”.

The second level of performance was Energy Transfer LP (ET) with 36.88% and Targa Resources Corp (TRGP) with 23.02%. ET is an MLP but TGRP is a corporation.

The other holdings in the top 10 had lower returns and one had a loss. The top 10 accounted for around 48% of the Fund’s total allocations and provided a weighted average return of 14.33%. And so I estimate that Other Interests had a 52% allocation, which produced a weighted average loss of about 6.5%.

Participation Analysis

BRS

MPC

According to its Annual Report, Marathon Petroleum Corporation

is a leading integrated downstream energy company. We operate the nation’s largest refining system with approximately 2.9 million barrels per day of crude oil refining capacity and believe we are one of the largest wholesale providers of gasoline and distillates to resellers in the United States. We distribute our refined products through one of the largest terminal operations in the United States and one of the largest private national fleets of inland petroleum product barges. Additionally, our integrated network of midstream energy assets connects natural gas and NGL producers from some of the largest supply basins in the United States to domestic and international markets.”

MPC has benefited from the rebound in consumption of petroleum products following the diminishing effects of the pandemic, the relative scarcity of US refining capacity, and the impact of the Russian-Ukrainian conflict on oil supplies to the United States. Europe. Unlike most energy infrastructure companies, its earnings are heavily affected by energy commodity prices, which have moved favorably for MPC. Although US refinery margins may have peaked, future quarterly earnings are also expected to remain strong as the EU replaces Russian oil.

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LNG

According to its Annual Report, Cheniere Energy, Inc.

is a Houston-based energy infrastructure company primarily engaged in LNG-related business. We provide clean, safe and affordable LNG to integrated energy companies, utilities and energy trading companies around the world. We aspire to conduct our business safely and responsibly, providing a reliable, competitive and integrated source of LNG to our customers.”

LNG has benefited from the impact of the Russian-Ukrainian conflict on natural gas supplies to Europe. Because of that conflict, the EU has decided to diversify its sources of natural gas away from Russia as much as possible now and in the long-term future. Due to LNG’s positioning as an exporter of liquefied natural gas (“LNG”), its future prospects for natural gas supply to the EU have never been brighter, making it a unique energy infrastructure company.

ENLC

According to its Annual Report, EnLink Midstream, LLC

operates a differentiated midstream platform that is built for long-term sustainable value creation. Our integrated assets are strategically located in world-class production basins and major demand centers, including the Permian Basin, Louisiana Gulf Coast, Central Oklahoma and North Texas. Our primary business objective is to provide cash flow stability while growing prudently and profitably.”

EnLink is primarily a gas-focused business. They have benefited from increased producer activity in their three producing basins. They also benefited from the impacts of the Russian-Ukrainian war because they are well positioned to capitalize on additional demand for LNG from US natural gas production.

annual report

ENLC

Conclusions

SRV has far underperformed the broad stock market over the long term. In recent years, the Fund’s biggest gains have been mainly limited to three stocks that are well positioned. The Fund balance has performed well below expectations. As a result, it makes more sense for me to hold the top three performing stocks, MAP, LNG and EnLink in a DIY portfolio (“DIY”) than to hold SRV and pay an expense ratio to do so.

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