I’d like to apologize in advance, but we have to cover some well-traveled ground…again. We know many of you joined “midstream” our call on Kinder Morgan and the MLP space, perhaps in January or February 2016, and some may not have the entire story arc. This article really may be the difference between a life-long customer and someone that cancels today.
By Brian Nelson, CFA
In June 2015, Valuentum issued a report “5 Reasons Why We Expect Kinder Morgan’s (KMI) Shares to Collapse,” a piece that included our warning about the impending collapse in shares of Kinder Morgan and our major concerns across the MLP spectrum due to their insufficient free cash flow relative to distributions paid in light of dropping energy resource pricing and their overleveraged balance sheets. This report was syndicated by Barron’s and referenced on public conference call webcasts, among other areas of distribution. During the months that followed, the debate raged on between Valuentum and sell-side shops, REIT investors, financial advisors and beyond. From June 2015 until Valuentum published its updated views on Kinder Morgan and the MLP space in January, shares of Kinder Morgan and the Alerian MLP ETF (AMLP) fell more than ~70% and 60%, respectively.
Certainly those that heeded our warning in June 2015 saved a bundle.
In January 2016, Valuentum published a more sanguine view of Kinder Morgan and the MLP arena in light of more conservative financial practices at Kinder Morgan and in the context of more reasonable valuations across the MLP space, far more reasonable than those of June 2015, the time at which Valuentum published its warning to members. Since January, shares of Kinder Morgan and the Alerian MLP ETF advanced nearly 70% and 60%, respectively, but as the image above shows, the retracement is but a fraction of where their equity prices once stood (shares would nearly have to triple off their respective bottoms to get “back to even.”). In January and February, Valuentum’s subscriptions soared thanks to our timely call on both sides of the trade. We were very appreciative of the new interest in our service. They say it takes years and years of incredible hard work to become an overnight success, right?
There are a few things I’d like to mention. First, the anonymous commenters in the public domain don’t have access to our research and thoughts. Only you do, so others outside of the Valuentum research service don’t know that we called the top in the MLP space in June 2015, and then the bottom in January 2016. They are pushing their own agenda, and frankly, it’s disgusting. It’s worse than disgusting. Many outside our paywall may not know that we cover each and every individual major business model within the MLP universe via our 16-page and dividend reports. Others that do read our articles may not understand that we like to focus on drawing similarities in the group with respect to their overleveraged balance-sheet status, free cash flow shortfalls after distributions paid, and ties to changes in crude oil and natural gas prices–my goodness, we know that each company is different. Can they be serious? Even more may not know that we’re well into the green since adding Kinder Morgan to the Best Ideas Newsletter portfolio shortly after the team at Berkshire Hathaway (BRK.A, BRK.B) established a position.
Why do I think bringing these points up is important? First, word of mouth is one of the most critical parts of advertising, for any company, anywhere — and it really doesn’t matter whose mouth it is, a random anonymous commenter on a content farm or other, and that’s why getting this story straight for our members is so important to me. It really may be the difference between a life-long customer and someone that cancels today. I’m not kidding. We don’t want accolades or much anything else, but rather what I think anyone deserves–for the story to be told correctly. I believe the Valuentum team did a fantastic job with its work on Kinder Morgan and the MLPs during the past few years, and frankly, I find it sad that we continue to have to defend our track record with each and every article we write on the space, but we will. We owe it to our members.
We’re going to keep working hard across all of our research platforms, delivering the best to our members, all the time. No other trust-seeking investment research team will endure what we’ve had to for any amount of subscription value. We will persevere. Onward!
(Yes, it’s that bad. No, it’s actually worse than that. I’d rather poke my eyes out.)
Related Stocks: ETE, ETP