In this issue:

 Overheated energy stocks have cooled off of late, offering fresh clues about the market’s leadership. And while many of our Best Buys have held up well, we’re on the lookout for new opportunities.

Canada’s oil sands have great long-term potential and some brilliant technology solutions as well, Robert’s tour of the facilities there confirmed. And while US shale looks more lucrative at the moment, that’s likely to change down the road as oil sands production grows while US basins reckon with a relatively steep depletion curve.

Steep would also be an apt description of the discounts suggested by the staff of the Federal Energy Regulatory Commission for the shipping rates the Seaway Pipeline is charging its customers. And while this suggestion may not stick, it is likely to set off a high-stakes legal battle.

Finally, we review recent results reported by several of the MLPs in our portfolio. A couple have thrown investors for a loop. But none need to be dumped; better to tune out the short-term noise and focus on the long-term opportunity.

Portfolio Action Summary

• Raising the target for Enterprise Products Partners (NYSE: EPD) in the Conservative Portfolio; buy below $66

• Raising the target for Chicago Bridge & Iron (NYSE: CBI) in the Growth Portfolio; buy below $84

• Lowering the target for Mid-Con Energy Partners (Nasdaq: MCEP) in the Growth Portfolio; buy below $24

• Lowering the target for Fuel Systems Solutions (Nasdaq: FSYS) in the Aggressive Portfolio; buy below $15  

Commodity Update

The price of West Texas Intermediate (WTI) continued to slide, trading Tuesday at $93.04 a barrel (down $4.74 from three weeks ago). Our expectation has been that WTI will test $90 by the end of the year. Brent crude fell $3.88 to $105.81/bbl, increasing the Brent-WTI differential to $12.77. The front-month contract for natural gas closed Tuesday at $3.62/MMBtu, up 3 cents over the past three weeks.

As we have been warning, Q3 refining results have been poor, and refinery master limited partnerships (MLPs) have suffered double-digit losses in the wake of their earnings reports. Alon USA Partners (NYSE: ALDW) reported a loss for the third quarter and said it would not pay a quarterly distribution. The unit price fell nearly 10 percent immediately after the earnings release and has continued to drift down slightly from there. Calumet Specialty Products Partners (Nasdaq: CLMT) also reported a net loss for the quarter. Units traded down nearly 13 percent for the week.

In Other News

• The price of West Texas Intermediate slipped to a 5-month low, trading at just over $93/bbl

• The Associated Press published a harsh article on the negative environmental consequences of increasing corn ethanol production. The ethanol lobby replied “It just isn’t so.”

• Shares of James River Coal (Nasdaq: JRCC) have fallen more than 30 percent this week on fears that the company is sliding into bankruptcy

• Transocean (NYSE: RIG) announced an agreement with Carl Icahn to add two of his representatives to a smaller board of directors, raise its dividend and move ahead with a conversion to an MLP structure

• Barron’s described Growth Portfolio Best Buy Devon Energy (NYSE: DVN) as “The Cheapest US Oil Play,” arguing that shares are undervalued by 25 percent. (Note: Robert is long Devon at $59.50 a share). 

Source: Barron’s