Todd Sullivan presented his in-depth investment thesis on Kinder Morgan (NYSE: KMI) at Wide-Moat Investing Summit 2016.
Kinder Morgan is the largest transporter of natural gas in the US. 38% of all natural gas transported in the U.S. flows through KMI’s pipelines. It operates under long term “take or pay” contracts that largely insulate it from natural gas price fluctuations. Rather, the demand for natural gas is what drives results. The EIA estimates U.S. demand for natural gas will grow 20% between now and 2020. For the first time natural gas has become the primary input for electric production in the U.S., replacing coal. This trend looks highly unlikely to ebb anytime soon. Additionally, the U.S. has begun to export liquefied natural gas, further increasing demand. KMI is expanding oil pipeline facilities and organically funding its current capex and dividend plans. It currently trades at <50% of its 2015 valuation despite seeing no deterioration in results over that time. Rather, the stock price has acted as if the company is drilling for oil and gas versus simply transporting it.
About the instructor:
Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. Todd’s blog at www.valueplays.net features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and CBNC. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”, the idea, Audiovoxx, was the top performing name over the following year. Todd also invests in start-up projects and is an angel investor in @Estimize , @milehiorganics and is a backer of “Follow Friday the Film” and “Money for Nothing: Inside the Federal Reserve.”
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