The Barron’s piece has a clever title but that is the last bit that is. The lack of journalism integrity is stunning. While I always want to hear the bear opinion on any investment idea, especially one that I am long in, the bull and bear sides both demand coverage. That’s just good manners for a writer and for an investor it should be required reading. Barron’s cites in their “research” as one of the negatives of Kinder Morgan that less than half of the 19 analysts covering it have a buy on the name. Thompson First call’s service polled analysts and they found a couple less. Two of them had strong buys, 6 with buys and the rest holds. No sells. As everyone knows, Wall Street Rarely puts a sell out so that’s in part what makes this Barron’s article so disappointing. When you do get one, it should be well researched and of high quality. Selling short is very difficult as you are going against the natural tide of the market. It’s hard to get good bearish research. Unfortunately this wasn’t one of them. It’s a flat out Sell the Sucker smack down. I expected more from Barron’s.
Barron’s did not quote from even one firm that had a buy on Kinder Morgan.
For example, I quote from some of the “bullish firms” most recent comments
- JP Morgan “KMI growth/yield proposition remains attractive relative vs.REITS and Utilities. “
- Merrill Lynch “KMP…we reiterate our 2016 forecast $87 PO based on a 6.5 target yield”
- Morningstar “Our fair value for KMI is $40 per share.” Stock pays a 5% or so dividend and has 25% upside. They prefer KMI versus than KMP, KMR, EPB and I do too. That’s also the one Richard Kinder is most heavily buying.
- Standard & Poor’s “Our 12 month target price of $39 is based on our 12-month forward projected dividend of $1.685 per share and a target yield of 4.3%
This is turning out to be very interesting debate between the bulls and bears. Until now HedgeEye,a small-understaffed firm hast been leading the bear raid on Kinder Morgan pretty much on their own. Now a research titan, Barron’s, joins in. Expect more bears and opportunistic traders to jump on the bear side. Being short Kinder Morgan hasn’t hurt the bear’s pocketbooks either. They are winning. The stock is down a lot.
HedgeEye has come a long way in a short time, too. They claim their track record is good, or at least I get a tweet every two minutes telling me so. That’s a gross exaggeration but they are very promotional. The critics note that their energy research analyst is just 23 and with an undergrad degree. Most analysts have advanced degrees and many years on the industry side experience to boot so when seasoned analysts at major firms scoff at Hedgeye’s analysis, I paid attention. I did read it though before dismissing it.
What I can’t dismiss now though is that this is becoming an obvious bear raid on Kinder Morgan and there could be more to come. Keith McCullough, the face of HedgeEye has over 33,000 Twitter followers. One of those is Carl Icahn. As you can imagine Icahn doesn’t follow many people, about 65 or so. So Kevin is becoming very influential. I’ve always known Wall Street is a rigged market but I thought Barron’s was one of the cleaner players.
I’m sorry I just didn’t find enough journalism in the article to take it seriously. But the intent is obvious, Game On. I found an interesting quote Keven Keiser, the analyst whose report this is all built on wrote, “I graduated with a degree in economics from Princeton University; looking back at old textbooks and syllabi, and listening to former professors debate current economic issues, I can’t help but feel like I “dropped a hundred and fifty grand on an education [I] could’ve gotten for a dollar fifty in late charges from the public library,” to quote one of my favorite movies, Good Will Hunting.
I totally agree with you about Economics, Kevin. It is a dismal science. Accounting is not though and until you find some rules Kinder Morgan is violating, your analysis just doesn’t hold up.
That doesn’t mean you’re wrong. As Keith apparently knows all too well economic science is as much about human behavior as it is about math. If you can succeed in driving down Kinder Morgan’s valuation you have won. As in life, first appearances count for a lot. Speaking of that I went back and found one of your firm’s investment calls dated May 22nd 2013 on the Internet. You had 8 short ideas. Only one of them PNRA is trading lower and that by only about 4%. Meanwhile your first short on the list JGBL is up over 100%. I know its not a fair analysis of the trading calls but I’m not a paid subscriber so it’s all I found.
I do like Keith’s writing. He has a good style and now obviously good connections. “ This game isn’t easy. Laden with our individual confirmation biases, we are all hostage to being human while we play it. There is a real-time score on every decision we make. Our opinion is marked to market every day. If you don’t love that; you don’t love the game.”
Keith, you won the game Monday but based on your own past track record of May 22nd 2013, I can’t say with any degree of confidence one year from now you’ll be looking so good.