Explained: “A.O.P. — The Little-Known Investment That’s Outperforming, Everything!”

Sniffing out the "American Oil Pension" teaser picks from Dan Ferris' 12% Letter

By Travis Johnson, Stock Gumshoe, October 18, 2012

I guess we should really be calling this “A.O.P. 2.0”, since the Stansberry folks used this same basic marketing pitch on investors about five years ago — though I think that was in service of their S&A Resource Report (then called the S&A Oil Report), and this one is an ad for the relatively conservative, dividend growth-focused 12% Letter edited by Dan Ferris.

And don’t worry, we’ll check and see whether any of their “AOP” investments are the same as they were five+ years ago … though I suspect it’s just the intriguing “American Oil Pension” concept that they’re rehashing and they’ve probably pegged some new plays on this theme.

The basic idea is that there’s an “income plan” that you don’t know about, but they can tell you if you sign up for their newsletter — here’s the quick spiel:

“Over the last 15 years, a little-known ‘income plan’ has outperformed the stock market, beating every asset class we know of – with annualized returns of 16.6%.

“In November 2012, we expect A.O.P. recipients will receive their largest payout to date… here’s how you can get on the recipient list now.”

I could go through and quote chapter and verse from the ad to give you the whole rundown on this history of the “AOP”, the reasons it exists, the great historical returns that investors have seen in these investments, etc., but it’s easier just to cut through the chatter and tell you that yes, “A.O.P.” is just Stansberry’s made up name for … “MLP”.

Master Limited Partnerships (MLPs) are an important part of the energy infrastructure of the United States — they are tax-advantaged vehicles set up (usually) to own and receive the cash flow from pipeline and midstream energy businesses, which includes everything from the gathering systems that pull gas and oil from individual wells to the huge interstate pipelines that move oil from Louisiana to New York to the processing plants that refine natural gas.

And I expect most Gumshoe readers have heard of MLPs — with high dividend yields that are generally in the 5-10% range (depending on size, perceived risk, etc.) and with a built-in tax deferral, it has not escaped notice that you get a lot more cash flow back from MLP investments than you do from most income investments. They can be somewhat complicated to deal with, particularly when it comes to taxes, and they run the gamut from “blue chips” to risky little guys that are just shy of being scams, but the larger MLPs that most of us have heard of — Kinder Morgan, OneOK Partners, Boardwalk Pipeline, Enterprise Product Partners, Williams Partners, El Paso Partners, Magellan Pipeline Partners, etc. — have almost all been teased at one point or another over the last half-dozen years.

So let’s see if Ferris has some kind of new twist on this investment, and find out if we can determine specifically which of the MLPs (sorry, “A.O.P.s”) he’s recommending to his subscribers. Ready?

“In 2006, we detailed an obscure income opportu