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The Making Of A Value Investor: The 2015 Edition

Summary Looking back at the last 18 months this is what I learned, in the order I wish I learned it. I discuss my thoughts on: framework, where to search for stocks, how to analyze them, portfolio sizing, etc. I share some of my favorite books and Seeking Alpha authors. I started my quest to becoming an investor during the Summer of 2014. Since then, I have read countless books, chosen financial markets as my major, met multiple hedge fund managers, became a contributor for Seeking Alpha, and most importantly started investing. Along the way I have learned much. Looking back at the last 18 months, I asked myself, if I had to do it all again, where would I start? This is my best answer, my try at a roadmap, and a few lessons I learned along the way. If I learn as much in the next year, I will be satisfied. I hope this will be helpful to readers just starting out. I also hope it will help readers get to know me as a Contributor. I. A Value Investor’s Framework. Warren Buffett’s notoriety helped me get started. As I was facing the mountain of information available in books and online, it was extremely overwhelming to figure out where to start. So I picked Buffett. My rationale was straightforward: This guy obviously figured it out, so what are his tricks? What are his secrets? Quickly enough I was led to Graham’s book: The intelligent investor. You’ll meet very few people with an interest in the stock market who will admit to not having read the book. Everyone has an opinion on it too: some say it is the cornerstone of value investing. Others say it’s outdated, and that there is no such thing as net-net anymore. I read it. The real lessons were in between the lines. The magical secret that I thought would make me a zillionaire by the end of the month didn’t exist. My key takeaway is that being a successful investor is function of your state of mind more than the tools at your disposal. Source: Sheknows.com If you don’t understand value investing in 5 minutes, you never will. – Ben Graham Simple, but it is a concept which is at the core of value investing and my beliefs as an investor: Buy something for less than it’s worth. The difficulty resides, of course, in determining how much something is worth. For that you will need several tools, and you will need to think in a way most people don’t. As such, being a value investor doesn’t apply only to stocks, but to buying groceries, shopping for clothes, and how you choose to spend your time. The eternal question is: Am I getting more than I’m giving? You can’t do the same things others do and expect to outperform. Unconventionality shouldn’t be a goal in itself, but rather a way of thinking. – Howard Marks. This is an oversimplification of the framework within which I have chosen to analyze the markets and securities. Here are my favorite books for anyone who wants to embrace this mentality and view of the world. Howard Marks: The Most Important Thing Seth Klarman: Margin of Safety George Clason: The Richest Man In Babylon George Soros: The Soros Lectures II. Where To Look For Securities? Source: Featurepicks Understanding the framework is one thing, operating within it is when the fun starts. If we group together all securities listed on the NYSE, Nasdaq and TMX Group, there were a total of 9012 as of January 2015. It is unlikely that any of us will ever have time to sift through all of them to find a mispriced gem. As such, we must find places where there might be a structural or emotional reason which justifies a discrepancy between price and value. In a market there must be a buyer for every seller, and a seller for every buyer, and understanding what motivates your counterparty is key. Try to imagine what the person on the other side of the trade was thinking. – Leon Levy It is Seeking Alpha’s contributor Chris Demuth Jr. who first got me to think this way. He takes pride in ” looking for non-economic counterparties “. There are many places one can search to reduce the amount of securities you need to look at to find an opportunity: worst performing stocks on any given daily session, spinoffs, mergers, upcoming inclusions or recent exclusion of major indices, articles in Wall Street Journal or Barrons (If you are going to subscribe make sure you get a discount, and once the discount is up call them to cancel, they will give you another), people you talk to, and authors on Seeking Alpha. You want to be looking in places where any of these apply: Your counterparty is panicking, and you can provide the liquidity they need at the price you want. Your counterparty isn’t looking, maybe there is no or little Wall Street/Bay Street coverage? Your counterparty doesn’t have a choice, like an S&P 500 ETF (NYSEARCA: SPY ) having to sell all of their position in the 500th stock when it becomes the 501st largest stock. Or like dividend funds having to sell their position when a company cuts the dividend, or spins off a division. What gets us into trouble is not what we don’t know. It’s what we know for sure that just ain’t so. – Mark Twain Flip the question, what does your counterparty know, that just ain’t so? There are three books I would recommend you read to help you find the best people to buy and sell from. Joel Greenblatt: You Can Be A Stock Market Genius Leon Levy: The Mind Of Wall Street Ken Fisher: The Only Three Questions That Still Matter Immature poets imitate; mature poets steal. – T.S. Eliot Here on Seeking Alpha, we are lucky enough to have among us some great minds. Sift through different authors, find authors who have a style you like. Think for yourself, but feel free to steal ideas, trust me the stocks don’t care whether your hard work found the opportunity or someone else’s did. These are my 3 favorite authors, but based on your style, there are many others which can offer you what you need. In no particular order: Also, look up value funds in your town. Send them an email, have a chat, ask questions, build relationships. Motivate your friends into learning more about investing, you’ll be doing them a favor. Everyone you know with a common interest in investing might have a great idea for you. III. How To Analyze The Stocks You Find? Source: Crossfitinvasion Once you have found a security with a reason to justify its mispricing, you will want to figure out what is the company worth. As an investor you will come to look at stocks as companies, not as lottery tickets. In doing so you will have to analyze companies’ business models and industries. It might seem like a daunting task and you might not have access to professional industry reports (I don’t), but a few quick searches on Google will help you gain the insights you need. Warren Buffett says he looks for companies which have large moats around them, companies whose returns on invested capital remains above their cost of capital for a long period of time. You will also want to analyze the management and strategy of the companies. To help you understand great business models and great management, there are two books which I recommend: Michael Porter: Competitive Advantage Mckinsey: Value, The Four Cornerstones of Corporate Finance. You will gain many insights from reading biography type books of successful investors. Time Horizon is a framework for patience. The two are almost the same thing but the first helps with the second. Knowledge and time horizon team up so you can more easily be patient. – Frederick Kobrick I enjoyed these: Peter Lynch: Beating the Street Mark Stevens: King Icahn Frederick Kobrick: The Big Money Peter Cundill: There’s Always Something To Do Obviously you will need to have a working knowledge of corporate finance, accounting principles, and valuation models. I use comparable ratio analysis as a guide to how a company fares against the competition. I will question any discrepancies in multiples within an industry to understand why some companies command higher relative prices than others. There usually is a good reason. I will also perform a DCF valuation of stocks I analyze. My thoughts on such models are mixed, since the output is only function of the inputs. Bullsh*t in, Bullsh*t out. When I talked to Natcan’s previous CEO Pascal Duquette, he told me of a time when he had to value an oil rig which was privately owned by a fund he worked for during his career. He had all the information, from the number of workers, to the amount of planned production. After just two years, his previsions of earnings were off 25% because one input hadn’t been correctly modeled. On the other hand a business’s value is equal to the present value of the future cashflows the business will generate, so you can’t ignore the model. The way I proceed is by reverse engineering the DCF. Assuming constant margins, what revenue growth is required to justify today’s price? Is such growth attainable? If not, what kind of margin improvement will be necessary at a lower growth rate to justify today’s price? Once again, is it achievable? From there I’ll use my judgment, are the assumptions priced into the security underestimating its potential, or overestimating it? By how much? Are they being underestimated enough that even if my conservative estimate is off, the security is still mispriced? Thinking as an investor, means creating a distribution of potential outcomes in your mind. If X, Y or Z happens, what does it mean for the price of the security? How likely are X Y or Z? What is the weighted value of the security for these given outcomes? It is an approximate exercise, but it’s the best we have. It’s what Howard Marks would call “second level thinking”. IV. How Many Securities Should You Buy? Source: icollector Now we come to portfolio allocation. I have to say, I’m unimpressed by Markowitz’s portfolio theory, and most of modern finance’s theory of investing. They teach us how markets should be, not how they really are. The single reason ultimate diversification doesn’t work, is that in times of crisis, correlations go to one, and you lose as much money as everyone else. As for eliminating firm specific risk, the consequence is also eliminating firm specific return. Risk doesn’t lie in the volatility of returns, but comes from the operations of the companies in which you invest in, and the price you paid for those companies. So how many stocks should you buy? It depends. It depends on your goals, on your aversion to losing money. I have met with the money managers from different firms, here are a few who have different outlooks: Brian Pinchuk from Lorne Steinberg Wealth Management , this value firm believes in investing no more than 3% of the portfolio in an individual security. Patrick Theniere, from Barrage Capital who believes in concentrated portfolios with stocks taking up as much as 10-15% of the portfolio. Paul Beattie from BT Global Growth , who has a couple dozen positions long and short. All three are successful money managers and have good track records, so there is no one size fits all answer. On one hand, if you have a stock go up 50% when it is only 1% of your portfolio, it will only represent a .5% gain for your portfolio, on the other hand a 50% loss on a 10% position is a 5% loss for your portfolio. I believe Ken Fisher summed it up when he said: Don’t aim to beat your benchmark by more than you are comfortable lagging it. No matter how many stocks you choose to buy, give yourself the chance to initially be wrong on the price you pay to double down several times to reduce your price. I adhere to Chris Demuth’s outlook on portfolio sizing which you can read more about here . V. Measuring Your Performance. Source: Rowealth You will also choose how to measure your performance. Are you aiming for absolute performance, or to beat a benchmark? Even if your goal is absolute performance, you will be confronted to comparing yourself to the benchmark. Why? Because if after several years you are unable to do better than an appropriate benchmark, why not spare all the effort and just invest in an ETF? You have to admit, over a long period of time it seems like a decent idea. SPY data by YCharts On the other hand I smirk every time I read a fund manager says he is happy because this year he delivered a performance of -10% whereas the S&P 500 did -20%. Yes it seems tough to deliver absolute returns during bad years for the markets, and I don’t claim to be able to do so, time will tell. Ultimately I’m seeking to perform on an absolute basis, as should all individual investors who are investing with the goal of spending that money someday. The problem with trying to beat the market is that many money managers have become closet indexers during the years. The question for these people is no longer: Do I want to own Apple (NASDAQ: AAPL ) or not at these prices? The question becomes: Should I overweight or underweight Apple relative to its weighting in the index? For me, this just isn’t intelligent investing. VI. Don’t Be Afraid To Share Your Ideas. Source: Wordpress Once you start to analyze stocks and find ones you would like to own, why not share your ideas on Seeking Alpha? One thing we all have in common here, from contributors, to readers, is we want to find great stocks for our portfolio. Writing articles here will help you put your ideas on pen and paper, the editorial team will help you go further on parts of your analysis you might have overlooked, and confronting comments will help you think of your thesis in a different way. Like everyone you are going to have some dogs in your portfolio, and it will be easy for you to blame it on the market or on bad management or whatever, but having your bad picks publicly available on Seeking Alpha will force you to question where you went wrong. I for example, recommended buying Volkswagen earlier this year. Not so great looking back, and rather than just shrug it off, I’ve learned that I should be weary of companies with obscure corporate structures since it creates opportunities for management to employ devious practices. VII. Final Words. I look forward to everyone’s comments, please feel free to confront me on anything you disagree with, constructive criticism is always welcome. If you liked this article, please consider following me on Seeking Alpha. Also in this article I gave a list of my favorite books. The price of these books quickly adds up. My tip to saving money on books was buying a kindle reader. You can get their latest tablet for $50. Kindle books are usually a bit cheaper, but subscribing to Scribd was my favorite way of reading all these books cheaply. I have no business with them but the subscription costs $10 a month, and if you use this link you’ll get two months free (No I’m not getting compensated for this.)

Healthcare And Biotechnology Closed-End Funds

Summary Tekla offers four closed end funds in the biotechnology/healthcare sector. Two long-established funds are focused on capital growth. Two newer funds add current income to their investment objectives. Healthcare and Biotechnology seem to have caught their stride after a rough third quarter. There are a lot of ways to invest in these sectors. One of the least appreciated is closed-end funds, and the best of these, in my opinion, come from Tekla. Tekla sponsors four funds. Two are well established funds that are regularly found at or near the top of the pack for equity CEFs. Two are new, one a little more than a year old and the other a little more than a quarter. The stalwarts are Tekla Healthcare Investors (NYSE: HQH ) and Tekla Lifesciences Investors (NYSE: HQL ). The new-comers are Tekla Healthcare Opportunities (NYSE: THQ ) and Tekla World Healthcare (NYSE: THW ). Some descriptive details for these funds are in the table. The two older funds operate much the same. They are unleveraged and have managed distribution policies for their quarterly distributions. The younger funds are structured differently from the older funds, but are similar to each other. For one thing, they use leverage to achieve their investment goals. Precisely what the extent of that leverage may eventually be is unclear. THQ is reporting 9.6% leverage at present, and THW is too new to have reported. THQ and THW also have managed distribution policies, but theirs are structured differently from HQH and HQL. They pay distributions monthly. Investment Goals HQH invests in the healthcare industry (including biotechnology, medical devices, and pharmaceuticals). The fund’s objective is to provide long-term capital appreciation through investments in companies in the healthcare industry believed to have significant potential for above-average long-term growth. Selection emphasizes the smaller, emerging companies with a maximum of 40% of the Fund’s assets in restricted securities of both public and private companies. HQL primarily invests in the life sciences (including biotechnology, pharmaceutical, diagnostics, managed healthcare, medical equipment, hospitals, healthcare information technology and services, devices and supplies), agriculture and environmental management industries. The Fund’s objectives and selection criteria are the same as HQH except for a change in wording from healthcare to the life sciences industry. Note that biotechnology heads the lists for each. To a large extent these are primarily biotech funds. One particularly interesting point is that the funds can and do invest in private companies. This can open opportunities not generally available to most investors, and certainly not readily accessible by investing in open-end mutual funds or ETFs. The difference between HQH and HQL is that HQL’s mandate is expanded to include agricultural and environmental biotechnologies. THQ and THW invest primarily in the healthcare industry. The funds’ objectives are to seek current income and long-term capital appreciation through investment companies engaged in the healthcare industry, including equity securities, debt securities and pooled investment vehicles. Notice that HQH and HQL make no mention of current income in their goal statements and THQ and THW do. Notice also, that THQ and THW include debt securities in their investment strategies. THW differs from THQ in being targeted more as an international fund. It expects to invest at least 40% in companies organized or located outside the United States. Both expect to invest in debt securities and pooled investment vehicles in addition to equity. So there are marked differences between HQH and HQL on one hand, and THQ and THW on the other. HQH/HQL are more closely focused on biotech; THQ/THW invest more broadly in the healthcare sector. The first set does provide excellent income, but that is not its purpose, which affects how the fund is managed. Finally the new funds expand their investment programs to include debt securities such as convertible and non-convertible bonds and preferred shares. Distribution Policies All four have managed distribution policies, but the terms of the policies are different. HQH and HQL have as their distribution policy the intention to make quarterly distributions at a rate of 2% of the fund’s net assets. To the extent possible, they will to do so using net realized capital gains. If those gains fall short of the target this could result in return of capital to shareholders. Capital gains in excess of distributions will be returned to shareholders as a special distribution with the December distribution. The default for HQH’s and HQL’s distributions is that they are taken in stock. Investors do have the option to request cash distributions. This policy reflects the funds’ emphases on capital appreciation rather than current income, and is unusual for CEFs. Both HQH and HQL began making quarterly distributions in 2000 (previous to that they were made annually). Both suspended distributions for three quarters in 2009-10 making no payment between June 2009 and June 2010. Otherwise, the funds have met their 2% of NAV payout objective without return of capital for all but two of the 60 quarterly payments they have made. Distributions for Q1 and Q2 of 2009, the quarters prior to the suspension of distributions did include return of capital. THQ and THW have current income as an investment objective. Their managed distribution policies are more similar to that of other managed-distribution CEFs. Although I have not seen it explicitly stated in the materials I’ve viewed, I assume that it means the funds expect to maintain consistent monthly payments independent of fluctuations in NAV and income, which is the most typical pattern of managed distributions. This can mean distributions that include return of capital and periodic occurrences of negative undistributed net investment income. THQ has paid $0.1125/share monthly since inception. THW has paid $0.1167/share for its three distributions. Current Status The two older funds are currently priced at premiums near 5%. The new funds have double-digit discounts as seen in this table. The distribution percentages shown in the table are based on recent payouts. According the funds’ policies the next distribution for HQH and HQL will be 2% of NAV on the record date. Z-Scores give us an indication of where the discount/premium stands in relation to the past. Positive Z-Scores mean the discount has shrunk or the premium has grown over the period. The absolute value represents the number of standard deviations the current value is relative to the average for the period. Large Z-scores (say, over 2 or under -2) can often suggest mean reversion is imminent. These values tell us that for HQH and HQL the premiums stand well above their means for 3, 6 and 12 months. As recently as the end of September, HQH had a -8.85% discount and HQL’s was -6.2%. Both funds have seen volatile pricing relative to NAV recently and have seen their discount/premium fluctuate widely. This is seen in HQH’s chart (from cefconnect.com ). (click to enlarge) During the third quarter meltdown for healthcare and biotechnology there was near-panic selling of the fund causing the discount to fall below -8%. With signs of recovery in October, the premium has been restored. These are the sorts of movements that some CEF investors look for and hope to take advantage of when they do occur. Portfolios HQH and HQL have very similar portfolios. HQL nominally adds exposure to agricultural and environmental biotechnology to HQH’s pure play in healthcare but this not obvious without getting deep into the fund’s holdings. At the top it looks very much like HQH. HQH holds 96% in equity; for HQL it’s 92%. The remainder is primarily in debt instruments. THQ holds 18.5% of its portfolio in debt instruments. THW’s portfolio remains a black box at this time, as there have been no reports as yet by the fund. Top holdings are available for HQH, HQL and THL but not for THW. (click to enlarge) Note how similar HQH and HQL’s lists are. The clear emphasis here is on biotechnology. THQ has positions extending beyond biotechnology to include more traditional healthcare companies such as Johnson & Johnson and Pfizer which is consistent with its more explicit emphasis on income. Other Healthcare CEFs My focus here has been on the Tekla offerings with the intention of clarifying how the new funds differ from the established funds. Before closing, I would be remiss to not mention two other healthcare CEFs; BlackRock Health Sciences (NYSE: BME ) and Gabelli Health & Wellness (NYSE: GRX ). BRE is more similar to HQH and HQL in that it is unleveraged and entirely domestic, but its focus is less on biotechnology than those funds. GRX carries 20.5% effective leverage and has a more diverse portfolio that includes food companies such as Kraft Foods and Kikkomann Corp as well as heathcare holdings. It is 84% domestic and 15% Developed Europe and Japan. BME, like the older Tekla funds shows extensive movement in its premium/discount. It now stands at a 7% premium, up from its 52 week average but well below its 52 week high of 16.2%. GRX, by contrast, tends toward a persistent discount which is now -13.2%, near its 52 week low of -14.8%. BME recently has tended to perform comparably to the Tekla funds; GRX has consistently lagged. Over a longer time frame the Tekla funds have turned in much stronger performances than either BRE or GRX, likely a reflection of their emphasis on biotechnology over traditional healthcare companies. This is illustrated by this chart tracking total return for the past two and five years. (click to enlarge) Summary The two sets of Tekla funds, HQH and HQL on one hand, and THQ and THW on the other, have different objectives and approaches to healthcare and biotechnology investing strategies. HQH and HQL are primarily focused on generating capital appreciation. The younger funds are more in the traditional CEF mold of emphasizing current income as well as capital appreciation. Despite the lack of formal emphasis on income, the distribution policies of HQH and HQL are, in my view, primarily attractive to an investor interested in current income. Their distribution yields are attractive and growing with NAV growth. For a shareholder invested for capital appreciation, the distributions can raise tax issues, so the funds are probably best held in a tax-advantaged account in such cases. In a taxable account, it would seem to make more sense to use ETFs to provide exposure to biotechnology to satisfy a capital growth objective. ETFs can effectively provide that capital appreciation with much lower taxable distributions. The premiums for HQH and HQL argue against entry into these funds at this time. A patient investor would probably choose to wait for some reduction in the premiums, if not outright reversion to discount status. Those premiums are now approaching all-time highs for HQL and are at rarely seen levels for HQH. An income investor seeking exposure to healthcare with a biotech focus may find THQ more appealing than either HQH or HQL at this time. There is, of course, only a scant record for the fund. Tekla has shown itself to be a strong manager of biotech equity portfolios but has little record in expanding that to include debt and credit. The discount of -11.6%, about as deeply discounted as the fund has been in its short life, looks to provide an attractive entry. As for THW, the fund is too young and information too scanty to appeal to me at this time. I suspect it will evolve to be as similar to THQ as HQL is to HQH.

Kayne Anderson MLP Investment Company – A Value Play With A 12% Yield

Summary The fund claims to invest at least 85% of total assets in energy-related master limited partnerships. It currently pays a dividend in the 12% range. The fund as a consistent track record of 11 years. If you recently sold the Kayne Anderson MLP Investment Company ( KYN), I wouldn’t blame you. It seems like the thing to do at this point. The MLP space has been beat up, bloodied, and stomped into the dirt. Overall, the oil & gas storage and transportation sector has fallen more than 30% in the past 12 months. The situation looks ugly and may get worse. So, why put any money into this space? Well, let’s see what it has to offer. Fund Strategy KYN seeks high total returns by investing in energy-related master limited partnerships (MLPs) and their affiliates and in other companies that operate assets used in the gathering, transporting, processing, storing, refining, distributing, and mining of marketing natural gas, natural gas liquids, crude oil, refined petroleum products or coal. Basically, companies that store and/or transport petroleum products. Top 10 Holdings as of 9/30/15 Enterprise Products Partners L.P. (NYSE: EPD ) 13.7% Energy Transfer Partners, L.P. (NYSE: ETP ) 12.0% Williams Partners L.P. (NYSE: WPZ ) 8.2% Kinder Morgan, Inc. (NYSE: KMI ) 7.4% Plains All American Pipeline, L.P. (NYSE: PAA ) 6.2% ONEOK Partners, L.P. (NYSE: OKS ) 4.9% MarkWest Energy Partners, L.P. (NYSE: MWE ) 4.7% Buckeye Partners, L.P. (NYSE: BPL ) 4.0% DCP Midstream Partners, LP (NYSE: DPM ) 3.9% Western Gas Partners, LP (NYSE: WES ) 3.9% Portfolio as of 9/30/15 Data taken from the fund’s website Value Proposition These companies, along with their massive infrastructure investments carry the life blood of this country. They have created a complex web of pipelines and storage facilities that reach every corner of the continental United States. These companies deliver about 26.6 trillion cubic feet of natural gas annually throughout the U.S. so we can keep our lights on, keep our homes warm, and power our industries. Also, much of the crude oil and refined products consumed must be moved and stored throughout the country. Pipelines have become the most cost-efficient way to move these products. Producers of oil and gas as well as customers of these products are equally dependent on the infrastructure investments made by the oil & gas storage and transportation sector companies. In other words, these infrastructure companies are a vital and an integral component of our modern society. Also, consider this. Further investments in our oil & gas storage and transportation infrastructure are continually needed to provide conduits for new oil & gas production and refined products. These new materials and products would be stranded without expansion of the infrastructure. Because of this fact, there is literally tens of billions of dollars’ worth of backlog for new infrastructure projects. Therefore, companies that operate in this space are not likely to be going out of business anytime soon. KYN allows you to invest in many of the companies easily and without the hassle of the dreaded K-1. And right now, there is a sale going on in the MLP sector. KYN is now selling at 50% of its price from November 2014. I think with so many choices out there in the MLP space, it makes sense to let someone else do the picking and save yourself the headache that goes with the K-1s. Risks However, investing in KYN is not for the timid. It is a Closed Ended Investment Company or CEF. If you are not familiar with these, it would be best if you did some research before investing in them. See CEF Connect for further research. This type of fund often uses leverage to enhance its returns. In the case of KYN, its leverage is about 32%. With that, you will notice that these types of funds typical exhibit more volatility than the overall market. It can be as high as twice the S&P 500’s typical volatility. Outlook So, where is KYN headed? In my opinion, we haven’t seen the bottom yet. But that doesn’t mean you shouldn’t have this stock on your radar. Today’s dog is tomorrow’s champion. Keep an eye on stocks like EPD, ETP, and KMI. These are the top three holdings in KYN. All but KMI appear to forming a bottoming pattern. Watch for the momentum indicators to begin to turn higher. This should indicate the bottom is in. Then, it’s time to start scaling in. Build a position over a few months. Be patient and let it come in. Here’s a recent chart of EPD showing its price consolidating around the $25 area. Also, it shows the RSI indicator in an up-trend. These are signs that the stock is bottoming and a trend reversal should soon follow. (click to enlarge) Chart Courtesy of stockcharts.com Why Invest? If you are looking for a good value play that will pay you to wait, KYN may be what you looking for. At the moment, this stock is paying a dividend in the 12% neighborhood. It also has a good record of increasing dividends. According to one source, Dividend Stocks , KYN’s 5-year dividend growth rate is over 9%. And according to Kayne Anderson’s fact sheet , funds invested at inception, i.e., September 2004, would have doubled by September 2015. That works out to be about 6.75% annual return. Not too bad when you also consider the increasing dividend stream you would have had during that time. There was only a slight decrease in dividends during the 2009-2010 period. Of course, it all depends on what your goals are. Are you looking for a steady stream of dependable dividends? I believe that KYN has proved it can do that. Conclusion One final thought I will throw in for free! KYN is not for everybody, but think about this. Money on the sidelines, for all practical purposes, is not earning anything in this low interest rate environment. That goes for all of us small-time retail investors as well as the large hedge funds and institutional investors. Stocks in the MLP space will not fall forever. Sooner or later, they will be noticed by the value hunters. Money will then flow to where there is value. And I believe the value of the MLP space is getting very compelling.