KMI

Stocks in the News: Kinder Morgan, Union Pacific, Colgate-Palmolive

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Let’s cover the quarterly reports from a few industry bellwethers. By Brian Nelson, CFA Kinder Morgan (KMI) Plans for Dividend Hikes Kinder Morgan appears to be back on track, something that it set the stage for in early 2016 when Barron’s wrote about Valuentum’s take, “Is Kinder Morgan on the Road to Recovery (January 2016).” The pipeline operator continues to trade near our fair value estimate of $20, so it’s hard to make the case that there is a tremendous valuation opportunity in shares, though its prospects for a return to dividend growth have improved. On July 19, Kinder Morgan announced that it expects to raise its dividend by 60% in 2018 and advance the payout at a 25% yearly … Read more

MLP Speak: A Critique of Distributable Cash Flow

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–> Handout 1: Pitfalls of Distribution Yield Analysis (pdf) –> Handout 2: Linking P/DCF to Enterprise Free Cash Flow Valuation (pdf) Let’s talk about a controversial metric that is used in master limited partnership (MLP) reporting. Just how useful is it, and should it be allowed? By Brian Nelson, CFA It’s been a few years since the fallout in the prices of most master limited partnerships (AMLP), but to me, it still feels like yesterday. We continue to have many concerns about the longevity of the business models of MLPs, and we maintain our view that the operating structure will be challenged over the long haul. New equity and debt funding (issuance) continues to, in part, fuel the distributions of most MLPs, … Read more

I CARE

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Image Shown: The S&P 500 from early 2009 through today, June 15, 2017. By Brian Nelson, CFA There it is — the upward-sloping chart of the S&P 500 (SPY) since the March 2009 panic bottom. What a sight to see… The past 8 years have marked an incredible bull market in US equities and one for the record books in many instances. The drivers behind the multi-year rally have been many — ultra-low interest rates and their magnifying impact on equity valuations, strong earnings growth from the doldrums of the Financial Crisis, and the proliferation of passive and dividend-growth strategies de-emphasizing the price-versus-value equation. “Money,” it seems, is chasing stocks at any price, and most of the trading on exchanges … Read more

Alerts – Spring Cleaning in the Newsletter Portfolios

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We’re making a number of changes to the newsletter portfolios. By Brian Nelson, CFA Changes in Dividend Growth Newsletter portfolio We’re removing Medtronic. Medtronic (MDT) reported decent fiscal fourth-quarter results May 25 that showed revenue advancing ~5% and bottom-line earnings-per-share beating consensus by a couple pennies. We’re not messing around in this frothy market though, and we’ve learned from our miscue with Teva Pharma (TEVA). Medtronic has too much debt this late into the credit cycle for our comfort, and frankly, we’re starting to question more and more why it might have changed how it measures free cash flow. We’re letting shares go from the Dividend Growth Newsletter portfolio. The company was added to the Dividend Growth Newsletter portfolio under … Read more

Valuentum’s 3 Breakthroughs in the Field of Finance and More

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Valuentum’s President Brian Nelson pauses for a picture before speaking at the CFA Society of Houston in March 2017. By Valuentum Editorial Staff Let’s cover Valuentum’s 3 major breakthroughs in the field of finance. The first one is big and may challenge you to rethink everything you think you know about investing. 1. On a logical framework, Valuentum has debunked John C. Bogle’s landmark syllogism that has paved the way for the concept of index investing. Index investing has been built on a logical shortcoming, whether supported by evidence or not. We think it is important that the investment community know of this. Read (pdf): The “Luck” and “Randomness” of Index Funds (2018), Brian Nelson, CFA See video documentation: /FALLACY_of_Index_Funds To … Read more

Alphabet, Intel, MLPs and More

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Let’s keep the good times going, would you say? Brian Nelson, CFA The good news during this first-quarter earnings season hasn’t let up, and we must say we’re very happy to say so. Newsletter portfolio holdings, our favorite ideas at any time, continue to exceed expectations. The Valuentum Buying Index helps us identify new ideas to consider, while the Dividend Cushion ratio helps us avoid dividend cuts. The Economic Castle rating helps us identify the best economic value-creators across our coverage universe. All three of these metrics (and our opinions on many more, including fair values/ranges and the like) you can’t find anywhere else but at Valuentum. We don’t leave any stones unturned when it comes to investment analysis. In … Read more

Valuentum’s Brian Nelson to Present at CFA Society of Houston

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Event Description: Mr. Nelson will walk through his experiences in valuation and financial statement analysis within the stock selection process to help portfolio managers learn how to optimize the strength and resilience of client portfolios–those either built for capital appreciation or income, or both. The centerpiece of the presentation will be a discussion on midstream corporate Kinder Morgan (KMI) and the master limited partnership (MLP) business model, in general, and how applying tried-and-true financial statement, valuation, and credit analysis (in the Valuentum approach) put portfolio managers far ahead the dividend/distribution cuts and the massive slide in share prices… To learn more >> To register >> This event is hosted by the CFA Society of Houston.

Kinder Morgan Continues to Chop Down Its Debt Load

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Image Source: Loren Kerns By Brian Nelson, CFA After a rough go at it, pipeline operator Kinder Morgan (KMI) continues to get its financial house in order, and we applaud management for its continued strong efforts in this regard. The corporate released fourth-quarter results January 18, and while they came in a little light, we see no reason to change our fair value estimate for shares at this time. In many ways, management’s ongoing reiteration of its goal to work toward reaching its targeted level of ~5 times net-to-adjusted EBITDA is admirable, and we’re hoping ongoing deleveraging initiatives coupled with prudent investment in growth projects (Trans Mountain expansion project and Elba Island Liquefaction project) will pave the way for future … Read more

The Coming “Goldman Sachs Era”

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Valuentum covers recent developments in the financials sector, including hopes for a relaxation of certain prohibitive Dodd-Frank rules that, if repealed, could pave the way for improved economic returns across the banking sector during the Trump administration. A look back at the month of September 2008, and how Goldman Sachs may very well shape the financial markets during the next few years are two other areas in the piece. Financials stocks have come roaring back since Trump was elected the 45th President of the United States. We’ve participated. By Brian Nelson, CFA It’s been more than 8 years now. The month of September 2008 shaped my view of the financials and banking sector more than any other month possibly could–The … Read more

MLPs: Williams’ Double Equity Raise

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Image Source: Roy Luck By Kris Rosemann and Brian Nelson, CFA Valuentum’s opinion of the significant capital-market dependence of the master limited partner (MLP) business model has not changed, and it appears the Williams’ family, Williams Companies (WMB) Williams Partners (WPZ), has become the latest illustration of this ongoing need. We maintain our view that there will be continued challenges to the MLP structure in the coming years, particularly in the event energy resource prices start to give back some of their recent gains and/or if high-yield spreads begin to expand (making borrowing more costly, irrespective of what the 10-year Treasury does). However, with energy resource pricing improving since the doldrums of January/February and the high-yield market warming up to … Read more