It was difficult to make a buck in 2011. Those who had a job thanked their lucky stars.
And if you had some capital to invest, trying to turn a profit was just brutal. The Dow was up 5.5% for the year, but it sure didn’t feel like it. The S&P 500 finished almost exactly where it ended 2010. In fact, it was just 0.04 points away from the final 2010 number. The Nasdaq was down 1.8%.
Gold gained 10%, but went through some wild swings, punishing investors who jumped on the bandwagon.
And if you wanted to simply sit back and collect interest, good luck. Money markets, CDs and savings accounts yielded next to nothing. Treasuries weren’t much better.
So it’s no surprise that investors started to rediscover dividend-paying stocks as the one place they could make a few dollars.
The more I think about it, the more I’m convinced this class of stocks will not only be trendy, but become white hot to the point where pundits will be using the “B” word – “bubble.”
Several factors will lead to the “bubblicious” gains in these stocks, which are usually energy related.
I think the sector will get so hot, you’ll first see the naysayers come out, and then the believers forcefully defend their beloved MLPs. At some point the sector will drop and the bears will say, “I told you so.”
But their satisfaction will only last until the face-ripping rally that will come next as investors jump in on the newly created buying opportunity. The stragglers will keep the rally going, as they don’t want to be left out of the next great thing.
All of this attention will lead to utterances of the “B” word by the end of the year.
But a bubble isn’t always a bad thing – if you’re in early enough and get out when things get frothy.
I’m very bullish on MLPs right now. With those higher than average yields, if 2012 is a repeat of last year, MLPs might be one of the few places to make some real money this year.