Hinds Howard

Master limited partnerships are the bailiwick of Hinds Howard, who has been tracking them since his teens. He became interested in them after discussions with his grandfather, Jackson Hinds Jr., who headed Entex, a gas utility, and was an early advocate of MLPs. Today, Hinds Howard is the chief investment officer of Guzman Investment Strategies and senior research analyst at Guzman & Co. investment bank. The firm launched research coverage of five upstream MLPs in late January of this year as a pathway to building Guzman’s investment-banking business.

A Houston native, Hinds left Texas to attend Boston University and earned his MBA from Babson College. After graduation, in 2004, he entered Lehman Brothers’ investment-banking analyst program. He was placed in the natural resources group, where he was soon helping to execute MLP deals.

“Maybe it was random, maybe it was karma,” he says. Over the next two years he worked on nine MLP IPOs that Lehman led, as well as several follow-on equity offerings.

In mid-2006, several of Lehman’s senior MLP investment bankers defected to the private-equity group, and he joined them. Lehman gave the group $400 million to invest in MLPs via an internal hedge fund. The group also raised $650 million in an external fund. In 2007, at the peak of the MLP market and Lehman’s run, after receiving his bonus Hinds decided to strike out on his own.

Over the next couple of years he tried out different enterprises. Along with a partner, he started and ran the Tampa Bay Rowdies professional soccer team. In early 2009, with two partners he formed a registered investment advisor, Curbstone Group, that managed assets in MLPs. And he began to blog ( MLPguy.com? ). The blog caught the eye of Leo Guzman, who asked him to join Miami-based Guzman & Co.

In a recent interview, Howard talked about MLP investment strategies.

Investor What does Guzman Investment Strategies do?

Howard We invest in MLPs via separate accounts on behalf of individuals and institutions. We also recently launched a private hedge fund with about $7 million, again, mainly invested in MLPs.

Investor Why should investors like MLPs in 2013?

Howard They are positioned well for two reasons. First, because of the interest-rate environment and the general hunger for yield, with investors seeking a better return than a savings account or bonds offer.

Second, there’s the secular boom of oil and gas unconventional drilling and the required infrastructure that MLPs will build. There’s a huge opportunity that will drive MLPs to outperform this year, whereas last year they underperformed the market. I think we’ll see another year of 6% to 7% distribution growth on top of 6% yield, so that’s a 12% to 13% total return. Where MLPs were really successful last year was with IPOs. The 13 MLP IPOs in 2012 averaged 22% returns—pretty amazing in a year when the Alerian MLP Index was up just 4.8%. It’s becoming very interesting to follow this space, because we’ve had MLPs now in refining, frac sand, oilfield services, offshore oil-field services and more.

Investor Which ones do you like best?

Howard I like the general partners that are publicly traded. They have historically outperformed. There’s not enough credit given to them for the level of growth they will have. General partners own the distribution rights of MLPs, and that’s where the money’s made. Owning those revenue streams is what made Dan Dun-can (Enterprise Product Partners chairman) and Rich Kinder (Kinder Morgan Energy Partners chairman and chief executive) billionaires.

So I like Kinder Morgan; I also like Energy Transfer Equity Partners.

Another big trend is upstream M&A activity. Linn Energy, Memorial Production Partners and Vanguard Natural Resources are examples of MLPs that benefit from this. There are only 13 of these upstream MLPs, and there’s a massive opportunity for them to buy mature assets from upstream corporations that may be strapped for cash given low natural gas prices. If you have liquidity and the ability to buy, you can do some attractive deals.

Investor What are your goals with Guzman?

Howard Our goal is to grow Guzman Investment Strategies from about $10 million in assets to $150 million or so. On the Guzman & Co. side, my goal is to gain credibility as a research analyst so as to grow our brokerage business. We’re launching coverage of five upstream MLPs this month (late January) and plan more MLP coverage in the coming months.

Investor Who have been your mentors?

Howard Michael Cannon, who I worked under at Lehman, is one of the godfathers of MLPs. He’s now the head of the MLP practice at BofA Merrill Lynch. The second person is Jeff Wood, who is now chief financial officer, senior vice president and treasurer of Eagle Rock Energy Partners; I worked with him at Lehman as well.

Investor How is your blog faring?

Howard I’ve published about 220 posts, I post every week. I have about 300 e-mail subscribers—executives in the industry, research analysts, and investors. I usually post over the weekend, so earlier than other weekly research on MLPs, which helps.