Not to oil.
We aren't saying that you won't get clobbered by rising interest rates if you own these but want to point out this as an example of going counter the herd when a correlation is spurious.
On the other hand you have all the problems of structures that can't use earnings to pay for anything and so have to continually issue shares or debt.
We don't use them but yieldcos do have a place in some portfolios.
From Barron's Income Investing column:
The plunging price of oil has caused all sorts of collateral damage across various markets in recent months. Such damage has extended to Yieldcos, the MLP-like investment structure that’s been particularly embraced by solar energy companies.SUNE $21.39
That’s unfair, according to Morgan Stanley, which today calls the solar industry’s linkage to oil prices “overblown” in explaining its buy ratings for three such Yieldcos - NRG Yield (NYLD), Abengoa Yield (ABY), and SunEdison (SUNE) – based on recent weakness. From Morgan Stanley’s Stephen Byrd and his team today:
We believe investor concerns about a drop in solar power demand due to low oil prices, which in our view are overblown, is responsible for weakness in solar-driven stocks and Yieldcos over the past couple of trading days…. “Oil contagion” is out of proportion in the solar/Yieldco space, in our view. Over the past couple of trading days, solar stocks and Yieldco stocks have been under significant pressure, and the #1 investor concern raised is whether low oil prices will significantly reduce global demand for solar power…. [O]ur projected solar demand is heavily driven by improving solar economics and favorable regulatory dynamics....MORE
NYLD $46.91
ABY $21.60
