Most of the recommended stocks in our model portfolio and our high yield energy list trade well above their "Dream Buy" price limits, observes Elliott Gue, editor of Energy & Income Advisor.
Indeed, most of these stocks haven’t even come close to those levels over the last 12 months, since 52-week lows are also above the Dream levels. Both factors, however, could change radically in coming months, given even high quality energy stocks’ notorious price volatility.
Already back to a Dream Price now is Kinder Morgan Inc. (KMI), which failed to break meaningfully above $20 a share once again earlier this month and has since dropped around 15 percent from that level.
Since announcing Q1 results in late April, Kinder’s only reported business news has been highly favorable. The company gained well-heeled private capital giant Blackstone as a 49 percent partner at its Elba Island LNG export facility in Georgia. That likely positions the asset for further investment in capacity growth. And it opens the possibility of low cost financing for other projects going forward as well.
In addition, Fitch affirmed Kinder’s BBB credit rating with a stable outlook. Emerging capacity constraints in the Permian Basin continue to boost the value of the company’s pipeline assets there.
And they promise to accelerate what should be easy to execute expansion, which management discussed at a Bernstein analyst conference earlier this month. Also, the shipping business appears to be picking up momentum and the CO2 operation is headed for another good quarter.
The decline in Kinder shares, in other words, doesn’t appear to have anything to do with actual company developments. Rather, it’s the result of investor fears of how a recession might impact the midstream energy business overall. That’s magnified by the fact the company is a member of 171 individual stock indexes, and therefore all of those ETFs that track them.
We’ve recommended this stock for some years, so long-time investors very likely already own some. But back yielding close to 7 percent with very low operating and financial risk, Kinder is again a strong buy for anyone light on the stock. The Dream Buy price is $18. The highest recommended entry point is $22.