Andrew Bary

Former bond king Bill Gross says that the hot energy pipeline stocks "'seem to be topping" after a big run and that he has scaled back his exposure to the group.

In a post on X, Gross tweeted: " MLP pipelines seem to be topping. Hold if you like 6.5% tax-deferred yields. Sell if you own too much. I own less than I did 2 days ago."

Gross has been a big fan of the pipeline sector and in particular the companies structured as master limited partnerships. When he began recommending the stocks more than two years ago, Gross was attracted to the combination of high yields -- often close to 10% -- and tax advantages.

Gross was a co-founder of the big bond manager Pimco and is now a private investor

The MLPs have traded at discounts to pipeline companies structured as corporations like Kinder Morgan and Williams Cos that could tap a broader group of institutional investors. Individuals are big holders of the MLPs.

In a post on his website in October, Gross wrote that he liked companies like Plains All American, Western Midstream, Energy Transfer, Enterprise Products Partners and MPLX.

Gross wrote then that MLPs benefit from a tax-deferral feature on distributions (the MLP equivalent of dividends) that can allow investors to defer taxes on a chunk of their distributions until they sell their units.

"The compounding deferral could add as much as 1% or so over a 5-10-year average holding period, turning the 8% average to a 9-10% dividend return on your portfolio," Gross wrote.

Many of the MLPs recently have hit multiyear highs.

Write to Andrew Bary at andrew.bary@barrons.com

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February 06, 2025 16:09 ET (21:09 GMT)

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