Kinder Morgan Inc. (KMI)

Pays a nice dividend. Oil can’t break out and until that happens we will not see oil related stocks break out. This will be in no man’s land. It is okay to hold it for the dividend.

Kinder Morgan (KMI-N) or Kinder Morgan Canada (KML-T)? In the short term, he would choose neither. If certain things happen, he would look at the Kinder Morgan Canada position. The Canadian subsidiary, without the pipeline expansion, is worth $15. That is just on the assets and the quality of the assets. Since you can get the shares close to $15, you are getting all the optionality. He is waiting for an opportunity to get this under $16. In the US, it is an MLP, and he is not positive on the MLP market. *Correction by BNN on June 6/17 that they are no longer an MLP, they are a common stock company. (Bill) There is just so much debt associated in that area.

He likes this at current levels. Had a disastrous 2015 and an early 2016. They’ve been able to repair the balance sheet and work through their debt issues. Despite the price of oil, you still have to get the commodity from point A to point B. If Trump is able to pass the stimulus package infrastructure spending, it would be geared towards the pipe. We’ve seen his pro-energy reforms. This gives you a little over a 2% dividend yield.

He would rate this a Hold, but it could go to a Buy. Generally, infrastructure pipeline plays are attractive businesses. They are less impacted by the commodity cycle. Trump is talking about putting in a tax policy that will allow for depreciation of assets in the 1^st year. This would be an incredible offer. A lot of these firms will take that up and will expand quickly. Profitability and cash flow, etc. will really accelerate. He also has a really friendly market for energy with the new energy secretary who is going to try and reverse the whole EPA environmental issues.

(A Top Pick June 16/16. Up 20.99%.) He liked the pipelines in February.

He really likes this. You are starting to see a bottom form in energy, in terms of fundamentals. Land rigs are down to a 5-year low. Deepwater rigs are at a 5-year low. If they can get some help with OPEC cutting production, that would help a lot. We’re still oversupplied on energy, but the growth rate supply has come down significantly. This company is essentially the superhighway of oil and gas in the US. They have really improved their balance sheet. The dividend has been cut and you are now getting a 3.4% yield. Now that Berkshire Hathaway is a shareholder, investors can give a little sigh of relief.

They collapsed a number of MLPs into a normal corporation and then had a number of challenges. Now you are starting to see Cap-X and oil picking up. It is a great operating company. It is a one of a kind. You have another 20-30% upside.

He likes the longer-term growth prospects. Feels that you can really bank on mid-single digit cash flow growth and dividend growth. It has energy infrastructure assets throughout the US and is a relatively large player. It came under pressure when commodity prices sold off so there are some sentimental related risks, unless there is a rebound in oil prices. Relatively strong balance sheet and the dividend growth is sustainable. He might increase his exposure if there is a pullback.

Largest pipeline operator in the US. He likes it in general. He is worried that they are only interested in growing the size of the company. He prefers others.

It is one of the sectors that rallied on the safety trade. It has already had its run. KMI-N would be a turnaround story rather than a pipeline play.

The company is really at an interesting time. They had a lot of spinoffs to finance their pipelines. It was really just a cost of capital arbitrage. They brought all those in, slashed the distribution to what they believe is a sustainable level, cut their backlog and stated that they were not going to borrow to fund projects. That worked when we could get money really cheap, but can’t seem to get as much money now or as cheap. They are actually migrating back to a growth stock.

The 5-year chart shows an overhead supply from 2012 to 2015. It is just recovering back to the neck line of around $28, and when it reaches that, there are a ton of people that would like to Sell.

He would play a gas producer for a gas bounce back (ARX-T). KMI-N is a pipeline company mostly and they had financial issues, which scares him. It is a turnaround story.

Pretty much anything you bought shortly after BREXIT has done really well, including this one. This is now showing some stability and share price appreciation. Although it is well off of its highs, he is not comfortable with its valuations. If you have made some good, short-term money, he would be a seller. On the other hand, if you have lost money, he wouldn’t be in a rush to Sell, because it is still quite a way off from where it was at its highs. Doesn’t like this one long-term.

(Market Call Minute.)