TTP - CTR: A Good Fund With An Upcoming Merger Opportunity

2024-06-30 09:07:02 ET

Summary

• ClearBridge MLP and Midstream Total Return Fund is one of the few remaining closed-end funds focusing on midstream energy companies, but it will not last long.
• The fund has a strong performance history and has outperformed the market over the past five months on a total return basis.
• The fund has been preparing for an upcoming merger and recently bought out some of its investors.
• The merger creates some opportunities for near-term gains if you stick with the fund for two months.
• The fund is currently trading at a massive discount to net asset value, so the merger can unlock some value.

The ClearBridge MLP and Midstream Total Return Fund ( CTR ) is one of a handful of remaining closed-end funds that focus on investing in midstream energy companies and partnerships. The reason why I state that there are only a few remaining funds in this category is that some of them converted into exchange-traded funds (such as all four of the ones that First Trust used to offer), were merged into other funds, or were discontinued due to limited investor interest. Many of these funds suffered severe losses in either 2015 or 2020 that were amplified by their leverage, and these disappointing performance histories could scare off some investors. In addition, energy companies in general have underperformed the market over the past decade, and that underperformance has prompted investors to move their money into other sectors of the market that have provided stronger returns. Finally, many of these funds traded at very large discounts relative to the value of their assets, so the thinking is that the fund could have better share price performance if it is structured as an exchange-traded fund instead.

In a previous article , I explained some reasons why midstream companies and master limited partnerships deserve a place in your portfolio:

Master limited partnerships have a number of characteristics that are quite attractive for individuals who are in need of income. In particular, most master limited partnerships enjoy remarkably stable cash flows and pay out fairly high yields.

For further details see: