Even the Dead Aren't Spared as Oil Price Rout Clobbers MLPs

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  • Cemetery and funeral home operator sank with oil's decline
  • `I mean, are people not dying as often?' one analyst asks

Even the dead aren’t immune to oil price shocks.

While energy companies have borne the brunt of crude’s 50 percent decline over the past year, stocks that have seemingly zero connection to oil and natural gas have also been dragged down. StoneMor Partners LP, which owns and operates cemeteries and funeral homes in 28 states, is among them.

StoneMor, "one of the largest companies in the deathcare industry," according to its website, posted a 13 percent drop in the first two weeks of August, as oil fell 9.8 percent. The company is a master-limited partnership, or MLP, which combines the benefits of income tax exemptions with the liquidity of publicly traded shares. Most MLPs, including Energy Transfer Partners LP and Plains All American Pipeline LP, are focused on energy.

"StoneMor gives you an idea about how ridiculously pessimistic investors have become about the MLP space," John Edwards, an analyst at Credit Suisse Group AG in Houston, said in a Sept. 14 phone interview. "I mean, are people not dying as often? This company has nothing to do with crude oil."

StoneMor is not alone.

The ETRACS Wells Fargo MLP Ex-Energy ETN, which measures the performance of MLPs not focused on energy, is down 14 percent from a year ago as of Sept. 15. The Alerian MLP Index, a gauge of large- and mid-cap energy partnerships, has slid 37 percent over the same period. Crude oil futures on the New York Mercantile Exchange have tumbled 49 percent to settle at $46.68 a barrel on Monday.

"There’s been a broad-based decline in MLPs, and you’re seeing company names that are not exposed to oil getting caught up in this," Christopher Sighinolfi, an analyst at Jefferies Group LLC in New York, said by phone Sept. 17.

Redemption may be in the offing. StoneMor is poised to benefit as MLP investors seek to add non-energy partnerships to their portfolios amid the oil rout, John McNamara, the company’s director of investor relations, said in a Sept. 18 phone interview.

"We’re not in any way exposed to the energy sector, but there’s been some sympathy trading with the rest of the MLP space," McNamara said. "As investors become more concerned about diversification away from oil and gas, we’re able to take advantage of that trend."