Tuesday, September 17, 2013

New Purchase - KMI


I decided to go ahead and grab some additional Kinder Morgan shares while they are cheap.  This purchase will boost my annual income by $57.60, not bad!  I now have a significant stake in KMI and am unlikely to increase the weighting going forward.  Similar to PM, both the yield and dividend growth is strong here. 

As most of you know, Kinder Morgan has been under attack by Hedgeye analyst Kevin Kaiser, the same same guy who bashed Linn Energy a few months ago.  I believe the scheme here is to drum up negative attention to make profits on short positions.  Hedgeye is actually pretty clever in my opinion, they are intentionally picking on difficult to understand MLPs.  MLPs are pretty good targets for scare tactics because I don't think most investors bother to do much research.  Does the average investor listen to conference calls, read annual reports, or check financial statements?  I think not.  Pretty easy to scare retirees who bought KMP on a recommendation as a safe income source. 

So maybe KMI continues to slide, I sure don't know.  But I think I got in at a price that will serve me well over the long term.  It's not the best price I've ever gotten with Kinder, however it will reduce my average cost basis.  I'll take that. 

I'm probably not going to buy anything else this month with the possible exception of TGT or maybe BAX.  I'm watching TGT very closely.

10 comments:

  1. I also increase my position of KMI today as well. Good buy. :)

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    1. Nice I just checked out your website and it looks great! Investing in fantastic companies is a great strategy if you plan to hold for many, many years in my opinion.

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  2. Nice buy. KMI, TGT, V and OMI are on my short list to add or add to this month.

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    1. All reasonable investments, no doubt. I have a $31.50 fair value on OMI and it's currently trading at $35. While I would have no problem buying additional shares of that business, I will wait for a better valuation. Morningstar rates it as 1 star on a lower fair value than mine, be careful! Anyways I always appreciate your thoughts.

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  3. I plan on increasing my position on KMI as well. I think you hit the nail on the head as MLPs are very rarely understood and mostly owned by retail investors who are more easily spooked. Good price for KMI, not a bad company to be overweight with.

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    1. I had a chance to listen to the Kinder Morgan investor conference today and was quite impressed. Rich went into great detail and in the process debunked hedgeye's arguments. It's really nice that management took the time to do a service like this for investors. Rich Kinder is one of my favorite CEOs.

      It appears the whole market popped today I think I will sit on the sidelines for a bit. The market as whole appears a bit over heated to me.

      Have a good one!

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  4. I like the purchase here as it's not too far above my cost basis. Unfortunately there's no free capital right now and oil/energy makes up a a very large portion of my portfolio so I need to try and diversify away from that. I like TGT as well and have a pretty sizeable position there. Loved their last dividend increase. I'm hoping to get a chance to pick up some BAX closer to the $70 level.

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    1. Well I know you're buying a house so I don't blame you. I don't know if you plan to have kids or what not, but buying a house is a BIG deal and more important than purchasing a few shares of a publicly traded company. Your family is more important, plus the stock market is over valued anyways.

      One thing I do not like about the military is that I must constantly move. Buying a house is very impractical for me. It's not in the cards for my situation.

      I hope to join you as a Target shareholder in the next few months.

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  5. A very timely move considering today's pop. I was seriously thinking about buying more KMI earlier this week, but given that it's my second-largest holding, I held off. Now I wish I hadn't! But I've learned not to dwell on such things.

    I listened to the conference call this morning and I was impressed with how Rich Kinder addressed various concerns. His explanation of the different categories underlying the $222M difference in El Paso pipeline expenses was very informative. As far as I'm concerned, he satisfactorily addressed the issues raised by the Hedgeye analyst, and it seems as though the market agreed.

    While today's market surge gave my portfolio value a nice boost, it also pulled several stocks on my watch list further away from my price targets. Thus, I'm not sure when I'll be making my next purchase.

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    1. Agreed. The investor conference was reassuring and I'm glad they did it.

      Hmm, it appears I managed to time this one pretty well. 100% luck though. I've had plenty of horrible timing too (my early purchases last month weren't so hot). It evens out over time.

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