Even more impressive, every time one of them goes public, it’s up an average of 38% a year later.

by Neil George

Dear Investor,

Stocks don’t come close. Bonds lag even further.

Only one asset class has returned 20.4% a year over a stunning eight years running. And it’s an investment niche so tiny, unpublicized and downright odd that fewer than one in 100 investors have put a single cent in it.

If you’ve never heard of Master Limited Partnerships, it’s time to listen up... because not only are they throwing off huge gains, but these gains are accelerating.

And unlike so many top-heavy corporations that pay their executives millions while the stock price goes nowhere, MLPs pay their profits directly to you. They have to, by law. Only they pay much bigger dividends, because they pay no tax.

For the millions of retirees who once lived off income investments, and now find it impossible, these hand selected partnerships have come to the rescue. Just think about it. You can easily pocket $10,000 a year for every $100k you put into these cash cows. And you can stagger your payments to come in monthly—so it’s convenient to pay monthly bills.

As an added bonus, your personal taxes are so low that you’ll think the IRS has gone soft in the head. Thanks to depreciation, 80% to 90% of the distribution you get from a typical partnership is tax-free until you sell. (In fact, some partnerships let you pocket high yields for 10 years or more before you pay a single penny of tax.) One of our favorites yields a nice 2% and 100% of your income is tax-free. Try to find a muni bond as generous as that!

More than Just Energy

Congress gave the green light to tax-free partnerships in 1986 to promote investment in “midstream” energy assets—the pipelines, storage tanks, terminals and ships that move energy from producer to user.

Since they profit from the constant flow of energy, midstream MLPs let you milk a steady stream of profits no matter what energy prices do. I don’t know if oil will be $50 a barrel or $100 a barrel a year from now. I can’t tell you how much coal or natural gas will be selling for either. But I can almost certainly guarantee you that we’ll be using more of all three.

These midstream MLPs are a pure play on the growing demand for energy. Unless people stop having babies on our increasingly crowded planet, energy partnerships will provide a growing income stream for years to come.

What's more, this tax-free business model is so irresistible that it’s now attracting players in a variety of qualifying industries, including real estate, fertilizer, orchards, timber, toll-roads, even cemeteries! All these companies are sidestepping the IRS and passing their hefty and rising earnings straight to the investor. And “hefty” is a classic understatement for many of these outfits...

Terra Nitrogen, an Iowa-based seed and fertilizer outfit, has shot up an astounding $40 to every $1 invested in just the past five years.

Pope Resources, which owns and manages vast spreads of timberland in the Pacific Northwest that has doubled its dividend, has more than tripled in the past five years... and has shot up 625% since its 1989 launch.

Investors in New England Realty Partners have, racked up a gain of 1,102% in the past 10 years. This tiny ($79 million market cap) regional landlord has a remarkably consistent track record of steadily rising cash distributions.

For head-turning long-term returns it’s hard to beat Alliance Bernstein Holdings. Since its start almost 20 years ago this investment-management partnership has compiled a 9,049% total return. That’s a 90-to-1 jackpot.

With so many massive gains emanating from a single asset class—and a small one at that—it should be obvious why we’re starting The Partnership. Statistically speaking, this tiny investment niche has had 10 times its share of success stories.

When you turn $10,000 into $400,000 in five years, as Terra Nitrogen investors did, you’re talking about the sort of money that can permanently upgrade your lifestyle— without having to wait a lifetime to get it.

The Race Isn’t Even Close

Combine a cash-heavy operation with generous tax benefits and you have a formidable business model.

Over the past 10 years, MLPs have crushed the S&P 500 by 318% to 34%. That’s 15.4% versus 3.0% on an annualized basis.

(MLPs also beat the S&P Energy Index by nearly 100 percentage points. So there’s something going on here more than just a bull market in energy assets.)

When you see returns like that you might think you’ve missed out... and that it’s too late to profit. You’d be wrong for three reasons:

1) Despite their impressive run-up, Master Limited Partnerships are still cheap compared to alternative yield plays like utilities.

2) The big-picture forces driving PTP growth haven’t changed.

3) Investment in new energy infrastructure is growing faster than ever.

The fundamental underpinnings that have propelled years of out-performance remain solidly in place. This asset class is still in its infancy... or adolescence at most.

The only reason these juggernauts don’t get more publicity is because they’re not institutional products. They’re designed for the little guy, not the big boys. With their low level of institutional ownership, Wall Street’s hordes of salesmen have little reason to pay attention. And almost zero Wall Street research is done on them, for the very same reason.

I’ve Seen a Gazillion Investments, But Nothing Like This

I’ve peddled just about every product on Wall Street. But this is the first time I’ve found an asset class so appealing (and underexposed) that I’ve started an advisory service to cover just it.

I’ve manned trading desks for Merrill Lynch in Vienna, London and New York... run offshore mutual funds from the Channel Islands... traded currencies on four continents... served as chief economist for a $50 billion bank... bought and sold billions in bonds... and introduced foreign-currency bank accounts for U.S. investors.

I spent 21 non-stop years making rich people even richer. And I made a wad of money for myself along the way.

And then something finally snapped—in a good way.

Fed up with Wall Street’s “fleece the sheep” mentality, I made an abrupt career change in 2003, switching my allegiance to the customer side of the counter.

I’m now head honcho at Personal Finance—
America’s most popular general-purpose investment letter. We cover all the bases in a systematic, “pay me now” approach to wealth building.

I make half the money I used to but I’m having twice the fun. (How many houses, cars and boats do you need, anyway?)

And I feel great about what I do. We’re introducing thousands of investors to these high-yielding hard-asset plays for the first time.

Huge Yields Aren’t the Whole Story

When you buy a partnership throwing off a 10% to 15% distribution, that’s just the start of the fun. Plenty of partnerships have also grown their businesses impressively, creating huge capital gains.

Let’s say you put $25,000 in Enterprise Products Partners at the start of 2000. By now, you'd be collecting $10,996 in annual distributions —and almost a 44% yield on your initial investment. And that’s all on top of more than $55,000 of capital gains. Your total return, assuming you reinvested distributions: 466% or 22.6% annualized.

Enterprise is by no means an isolated example. Plenty of other partnerships have grown their income streams even faster. In fact, the average U.S. PTP has boosted its payout at almost 8% during the past five years.

A well-run partnership can rival the growth pattern of a high-flying tech stock...

Kinder Morgan Energy Partners, for example, was worth barely $130 million at its birth 15 years ago, and now has a market cap of $14.8 billion. When you consider this pipeline operator has returned 90% of its earnings to unit holders along the way, that’s incredible growth.

Since its inception, Kinder Morgan has increased its cash distribution 30 times in a row —from $0.60 a unit to $3.96 now. And its unit price has risen from $5.75 to $58, for an 912% capital gain on top of the distribution.

There have been plenty of nice gains in the coal patch, too. The units of Natural Resource Partners have risen 487% since this lessor of Appalachian coal mines went public just over five years ago.

Penn Virginia, another coal operator, went public in 2001 at $10.50 per unit and is now trading at $27.50. Throw in the generous distributions over the years, and it has not tripled, but quadrupled its investors money.

Catching on Fast—and Attracting Some Bad Apples

In the mid-1990s, just a handful of MLPs traded on Wall Street. But these unique income-investing vehicles are multiplying like rabbits, and today, you can choose from 133 U.S. MLPs (at last count) with a combined market cap approaching $130 billion.

I love this asset class as a whole, but you’ll find a wide mix of quality in that group. Some financial weaklings have converted themselves into partnerships to disguise their faults and hitch a ride on the PTP boom.

You don’t want to own these “wannabe” partnerships... and to make sure you don’t, all you need is The Partnership.

Since there is no official clearing house of information on these little-followed securities, we had to dig hard just to find every publicly traded partnership. In fact, The Partnership is the only publication that tracks down every one of these hard-to-find cash cows and covers them all in one convenient service.

Our Favorite Picks Right Now

We cover all Master Limited Partnerships in The Partnership—big and small... foreign and domestic... and in every business sector.

But to mark the launch of our new publication, we’ve compiled our absolute favorites—14 rock-solid partnerships with sustainable and growing dividend distributions—in a series of special reports that we’d like to send you free to get you off to a running start.

We sifted through every publicly traded PTP to find top-quality partnerships that own great assets with lots of cash flowing to their investors. While run-of-the mill partnerships pay about 7% or 8%, these jewels yield up to 13.7%. What’s more, they are fattening their payouts up to 15% a year.

Their income streams are rock-solid, not the phony pumped-up payouts that attract so many misguided “yield junkies” who discover too late that their exorbitant yields are fool’s bargains. Buy them now and they’ll treat you to rising income and share prices for years to come.

Here’s a peek at a few of the gems you’ll find in your free reports:

• A Pipeline of Profits. This PTP’s business is straightforward. Its storage facilities hold crude oil and refined products such as gasoline and jet fuel. And its pipelines transport crude oil to the refinery and then move refined gasoline on to consumers.
  
  This is purely a volume-based business. The more oil and gasoline that travels through its lines, the more money it makes. There’s zero commodity risk. With extremely low volatility and predictable cash flows, it is one of the cheapest pipeline MLPs out there, trading at just two-thirds times book value and yielding 8.7%.
  
  
• King Coal. Coal still powers 50% of the US electricity grid and 80% of China’s. Two of our favorite MLPs own some of the most sought-after coal reserves in the US. They’re benefiting from booming US coal exports to China and rapidly rising prices. And they offer yields of up to 8%.
  
  
• Profits in the Bulk. Dry bulk carriers are used to transport key commodities such as coal, iron, ore, copper and even grains over the ocean. China’s booming demand is behind huge increase in demand for dry bulk ships. A newly listed MLP owns a fleet of eight of these valuable ships and has plans to expand over the next few years. Currently yielding 11.5%, this fast-grower could bump up its payout by more than 10% per year over the next few years.
  
  
• Shipping Winner. Natural gas will be the world’s fastest-growing fuel for at least the next 20 years. But the biggest reserves are continents away from the biggest consumers. So this partnership’s fleet of liquefied natural gas tankers is in constant demand.
  
  Unlike many companies in the oil tanker business, it doesn’t lease its ships out on short-term contracts, but at fixed fees for 15- to 20-year periods. As a result, cash flows are generous and dependable, ideal for a PTP structure. It just announced that its fleet will be expanding from five LNG tanker ships to 13 in three years. Few MLPs can boast that level of growth. No wonder its distribution is growing so fast, at 14% a year.
  
  
• Property Partner. This real estate partnership specializes in sale/leaseback deals. It buys buildings and rents them back to their former owners using long-haul, triple-net leases. This liquefies the fixed asset for the seller and locks in steady streams of cash flows for investors/unitholders. Buy into this one and you’ll own properties throughout the U.S., Europe and Asia, shielding you from local real estate market shocks. With a solid distribution flow of almost 7%, it makes a great starting point for any partnership investor.
  

The Most Fertile IPO Market We’ve Ever Found
(Up 38% Across the Board)

As if high and rising distributions flowing from rock-solid businesses weren’t enough, we’ve discovered a fascinating wrinkle in the PTP market that—so far anyway—is almost like a license to print money.

Initial public offerings (IPOs) are usually bad news for small investors. By the time you can get in, the hype surrounding a new stock routinely leads to inflated prices that then drop off as the excitement wanes.

But partnership IPOs seem to exist in an opposite universe. There is little investor interest in new issues, yet a year later, prices are much higher.

We recently measured the return for all MLPs over the three-, six- and 12-month periods following their IPOs. (We used the closing price for each PTP on its first day of trading—the price you, I or any other small investor could get—not the often-unattainable offering price.)

Result? The average PTP returned 15% in its first three months as a public company... and a whopping 38% in its first year.

This sort of “free lunch” isn’t supposed to exist. So why does it?

Here’s our theory: When MLPs first start trading, most data services erroneously list their distribution yields at zero—simply because they haven’t paid out anything yet.

Even after their first payment, their yields appear to be just one fourth of their true levels. Take a $40 IPO that plans to pay $1 every quarter, for a 10% annual yield. After its first $1 payment the data services report a 2.5% yield. After the second payment, a 5% yield... and so on. It takes a full year before they stop underreporting yields.

When the full yield is finally obvious to everyone, investors take notice and jump in, driving the unit price higher.

The bottom line is that young MLPs literally don’t register on most income investors’ radar screens. Yet the distributions they intend to pay are right in the public record. All prospective IPOs file an S-1 registration statement with the SEC, listing projected distributions for unitholders, among other things. Partnership IPOs routinely offer indicated yields in 8% range.

Is This the Next Big IPO Gainer?

We’ve already got our eye on the next IPO likely to follow this profitable path. Quest Energy Partners filed its S-1 in late July and started trading November 9, 2007 at $18.

Quest has some 1,700 natural gas wells in Oklahoma’s Cherokee basin and plans to drill another 800 in the next 18 months. That’s one of the fastest growth rates you’ll find in any energy company anywhere. Based on Qwests most recent quarterly release, the PTP will pay more than 10.5% this year, but very few investors are aware of that yield because it just paid its first-ever quarterly dividend. In fact, the unit price has dropped below $16, making its prospective yield that much higher. We can buy in before the payment and wait for the crowd to bid up the price of our units.

Here at the office, we call these IPOs “Instant Profit Opportunities.” You can bet that we’ll be looking closely at every IPO that comes down the pike—so we can make every penny we can as long as this unusual situation lasts.

In the meantime, we’ve released an entire report on this “stealth” yield-capturing strategy. It’s called 38% in a Year—Hidden Riches in Partnership IPOs. You can get a free copy with your charter subscription to The Partnership.

GET YOUR FREE REPORT NOW

Get in Now and Watch the Slow-Pokes Pile in Later

Beyond their tax advantage conferred by Congress, you have at least three “big picture” factors on your side if you invest in MLPs at this early stage today:

• The first Baby Boomers turned 60 in 2006 and are now entering retirement. This means the leading edge of a generation 76 million strong will soon find itself searching for stable, income-producing investments to replace their regular paychecks. MLPs are perfect for this group, and can’t help but benefit from their collective billions in buying power. And this trend will continue for at least another 20 years as the Boomers continue to progress into retirement.
  
  
• Dividend-paying stocks outperformed the broader market in recent years, and should continue to do so as investors look to dividends to profit in an iffy market. Standard & Poor’s predicts that stock prices will rise only about 6% annually over the next few years, which means dividends will play a huge role in investors’ total returns. Just one more reason MLPs are tailor-made for the times.
  
  
• Changes to the U.S. tax code are allowing mutual funds and other institutional investors to buy MLPs more freely. This is a whole new class of big-dollar investor, previously shut out of the group. As this institutional capital finds its way into MLPs, the buying pressure will push up prices for the best-placed partnerships. In short, the bull market in MLPs is just getting started.

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6 More Reasons to Love Partnerships

1) Friendly regulators—Partnerships benefit from benign federal oversight, encouraging management to innovate and cut costs. These savings are then passed on to you, the investor. This is far different from traditional utilities, where gains from efficiency and cost-cutting must be “rebated” to the public in the form of lower rates.

2) Stable Earnings—Because they’re fueled by locked-in demographic trends, MLPs offer far more predictable earnings than the broader market. Their earnings volatility is less than a third of the S&P 500’s. That’s because sales volumes are highly predictable over the long run, as they are a function of population growth.

3) Immunity to bear markets—When you buy into a partnership, you have the luxury of ignoring the big market indexes. Unless the managers are real boneheads, you’ll keep getting those fat distribution checks every quarter—no matter what the economy does.

This is doubly true for energy partnerships, since demand for energy is virtually constant. During the 2002 recession, one of the sharpest in our history, the consumption of petroleum products barely budged… and the cash kept flowing to partnerships.

4) Diversification—Most stock sectors move in lockstep with the broader market. Not MLPs. Their returns are only weakly correlated with the stocks. And there is virtually zero correlation with bonds. Adding MLPs to your portfolio cuts risk while increasing total returns.

5) Payouts you can count on—Since a distribution cut would hurt a partnership’s unit price, management is extremely prudent with its cash. They keep 5% to 20% more cash on hand than they need for their distribution. In the history of Master Limited Partnerships, there has only been one distribution cut, and that was for only one quarter as the result of a rogue trader at the company.

6) Disciplined managers—Because they have to pay a big distribution out of their earnings every quarter, management is careful about their spending and construction projects. You won’t find any of the showy and wasteful ego-driven moves so much of corporate America is guilty of.

How We Find the Best for You

To make sure we have the best of these cash cows working for us, I’ll be doing the same kind of legwork that I’ve done for 21 years of digging up income investments. In all that time, I’ve never had a down year in any yield-oriented portfolio I’ve run—in either debt or equities.

It all comes down to the reliability of a partnership’s cash flow. And that means analyzing the guts of the business.

We want industry leaders with rising sales from their normal daily operations. And we make sure that margins aren’t just solid but increasing. This means the more a company sells, the more it makes. It’s hard for a company like that to get into trouble.

Then we do a “debt stress” test, studying the business assets and revenues with our banker’s hat on. The key question is, “Would we lend this company money?” And that answer is “yes” for every partnership you’ll find in our portfolio.

What You’ll Get When You Join Us

The Partnership is a web-based newsletter that you can access the instant we release each monthly issue. You can then easily print out the issue from your computer if you wish.

You’ll never have to wait for your issue by snail mail because as soon as we dot the last “i”, we’ll email you a link that takes you straight to the complete issue on our subscribers-only website.

In addition to your monthly issues, we will send you occasional “PTP Alerts” with unusually important breaking news. But please understand this is not a trading service. We’ll never frantically email you and tell you to buy XYZ by noon. Thankfully, there’s no need for anything that hectic.

Partnership investing is the most relaxing way to invest this side of T-bills. You can hold most of these steady growers for years. The only “fast action” you’ll have is when we find a decent partnership that has stumbled on bad news, and we jump in to bag a quick turnaround profit.

Here’s a peek at what you can expect in every issue of The Partnership:

• Feature story covering a timely partnership sector. When you realize how wide the spectrum of partnerships is, you’ll see there’s one that’s right for every investor—aggressive or conservative.
  
  
• Our Foundation Portfolio—These are the most reliable partnerships you can buy—across a variety of industries so you’re not overexposed to any one sector. These safest of the safe are perfect long-haulers for your portfolio—the kind you can buy and forget you even own, except when you’re cashing your fat distribution checks.
  
  
• Heavy Yield Portfolio—Here’s where we dig up the super-high yielders that put this asset class on the map. You’ll find a natural gas partnership that has boosted its distribution by 400% in less than four years... and a safely diversified closed-end partnership fund yielding 11.5%. You’ll also find the best bets for high yields in pipelines... timber... real estate... shipping... natural gas... coal... road-building, and more.
  
  
• Venture Portfolio—These partnerships are newer and more speculative. They’re not always the highest yielders, but are destined to soar in the right conditions.
  
  
• Portfolio updates, so you can tell at a glance what we’re buying and selling.
  
  
• Broker recommendations to help you buy the harder-to-find foreign partnerships that not one in a hundred of your fellow investors will ever discover.
  
  
• An entire archive of back issues, so you can get every bit of advice and information we have released since the start of The Partnership—just as if you had subscribed from Day One.
  
  
• And finally, no hidden agenda. The Partnership is ferociously independent. All we sell is our advice, so it had better be good. We love partnerships as an asset class, but we can and will be very critical of any troubled company unlucky enough to get onto our dirt list. And we’ll tell you exactly what their problems are.

Look at What Else You Get...

To welcome you as a new subscriber, and to get off to a running start, you’ll also receive a package of special reports we’ve prepared especially for new partnership investors. Here’s a peek at the three you get with a one-year subscription:

1) Power Hungry: Six Best Energy Partnerships to Buy Now

2) The Deal Makers: Four Fast-Growing Business Partnerships

3) Making Partner: Building the Ideal Portfolio of Master Limited Partnerships

Come on board for two years and you get these two additional reports:

4) Supercool: 5 Ways to Play Natural Gas

5) 38% in a Year: Hidden Riches in Partnership IPOs.

Charter Subscribers Save $101

A year of The Partnership, which entitles you to 12 months of advice, complete with buy and sell signals, plus as-needed updates—emailed to you within minutes of our investing decisions—costs $500.

But to mark the launch of our new project, we’re offering charter subscriptions for just $399 (with a 100% money-back guarantee, of course).

On a $100,000 portfolio, you can easily pocket $10,000 in distributions alone per year in these partnerships—and plenty more if you want to be aggressive. Is making six times the yield of the average stock—while reducing your risk—worth $1.09 a day?

Only you can answer that. But our guarantee makes the membership fee irrelevant. If The Partnership isn’t right for you, we’ll send you every penny of your payment back. No fine print and no time limit. Take a whole year to decide.

If you have any questions once you’re on board, feel free to call or write. Elliott or I will get back to you personally.

In fact, if The Partnership isn’t everything you expect, I want you to ask for your money back. That’s what the guarantee is there for. But I’m not too worried about cancellations. I think that once you grow accustomed to that flood of checks in your mailbox, you’ll want to subscribe forever.

A Comprehensive Service for Committed Income Investors

The Partnership isn’t for everyone. You will be part of an elite investment alliance—not a mass-circulation service. We want to make sure our service does what it’s supposed to for you: take the guesswork out of choosing a high-growth, high-yield partnership without any hidden liabilities that could trip up a safety-first investor.

There are now 133 partnerships on the NYSE, NASDAQ, and American Stock Exchange. There are about 30 more on foreign exchanges. If you jump blindly into this group, you’re likely to run into a few nasty surprises. The Partnership gives you a handful of the healthiest. Why roll the dice when you don’t have to?

One parting thought: After peddling virtually every product on Wall Street, I know how rare it is to find an investment that treats you like an equal instead of a nuisance. And I’m convinced that you won’t find any more customer-friendly investment than Master Limited Partnerships.

When those fat distribution checks come rolling in, you’ll recoup your initial investment before you know it. At that point, every check is pure gravy. And any capital gain down the road is icing on the cake.

When you consider the stock market has historically returned 9% a year, beating that right out of the gate in distributions alone is nothing to sneeze at.

Why not see for yourself?

Sincerely,

Neil George
Editor, The Partnership

P.S. Go ahead and try The Partnership FREE for a year! That’s right—sign up now and take the next 12 monthly issues—plus the special reports—while you decide if the service is right for you. If it’s not, no problem. I’ll return your entire payment—100%—and all the special reports you receive will be yours to keep.

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