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Kinder Morgan: Insiders Backing Up the Truck

September 16, 2013 | About:
Two weeks ago, I highlighted two REITs with large insider buying, American Realty Capital Properties (ARCP) and Annaly Capital (NLY). Today, I’m going to continue this theme with a quick discussion of MLP general partner Kinder Morgan Inc (KMI).

The “Kinder Morgan companies” refer to Kinder Morgan Energy Partner (KMP), one of the largest and most popular MLPs among income investors; Kinder Morgan Management (KMR), a sister company that pays its dividend in stock; El Paso Pipeline Partners (EPB), a more recent addition to the Kinder Morgan family; and Kinder Morgan Inc., the general partner responsible for the operations of the whole lot. Collectively, they are worth a hefty $90 billion in market cap.

Richard Kinder started the Kinder Morgan empire with pipeline assets tossed away by Enron, and he’s not your typical CEO. He doesn’t take a lavish salary, and he actually reimburses the company for the cost of his health insurance premiums. His income is based on the dividends he earns through his holdings of KMI.

Oh, and about that: Kinder just spent $18 million of his own money buying shares on September 9.

And he wasn’t the only insider buying. On the same day, another officer bought nearly $100,000 in new shares. And in the month of August, Fayez Sarofim, a director and one of the company’s biggest shareholders, bought about $15 million in new shares.

Like most income-oriented investments, KMI got hit hard as the market became fixated on Fed tapering. But I’ll trust the inside knowledge of the company’s directors before I trust the collective “wisdom” of an emotionally-charged market.

Action to take: Buy share of KMI and collect the 4.5% dividend. Plan on holding for 12-18 months or for total returns of 50%-100%. Use a 20% trailing stop as risk management.

  • CEO Buys, CFO Buys: Stocks that are bought by their CEO/CFOs.
  • Insider Cluster Buys: Stocks that multiple company officers and directors have bought.
  • Double Buys:: Companies that both Gurus and Insiders are buying
  • Triple Buys: Companies that both Gurus and Insiders are buying, and Company is buying back.

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About the author:

Charles Sizemore
Charles Lewis Sizemore is the Editor of the Sizemore Investment Letter premium newsletter and Chief Investment Officer of Sizemore Capital Management.

Mr. Sizemore has been a repeat guest on Fox Business News, has been quoted in Barron’s Magazine and the Wall Street Journal, and has been published in many respected financial websites, including MarketWatch, TheStreet.com, InvestorPlace, MSN Money, Seeking Alpha, Stocks, Futures, and Options Magazine and The Daily Reckoning.

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