"With the economy in the toilet and prices in the hopper, the notion of going 'long' energy right now might seem like a move that will lower our portfolio returns over the long haul. Not true. In fact, now's precisely the time that you want to establish or add to an energy position.
"Energy is not only an ideal hedge against rough markets, but more importantly, as I have noted repeatedly in recent months, one of the most concentrated upside opportunities available today.
"Further, energy has been cheap enough for long enough that most people have lost track of it. And anytime that happens, there are incredible bargains to be had. Like now.
"Kinder Morgan has not only proven to be far more stable than the broader markets, but it's also been growing at a time when lesser choices are worried about survival....MORE
With a contrary view, 24/7 Wall Street:
Kinder Morgan And Broader LP Distribution Conundrum (KMP, EPD, ENB, BSR)
Natural gas says bye to $10 for 'foreseeable future' (LNG Looking for Buyers)
There could be some trouble ahead in at least some of the entities in the pipeline business and the practice of distributions from LP’s if you look at operating numbers and the trends in oil and energy prices versus distributions to holders of the companies. Kinder Morgan Energy Partners, L.P. (NYSE: KMP) has reported a cash distribution per common unit of $1.05 per unit and distributable cash flow of $0.97 per unit, compared with a distribution of $0.96 per unit and distributable cash flow of $1.12 per unit in the first quarter of 2008. The company reported net income of $0.15 per common unit, less than half analysts’ expectations of $0.31 per common unit. Revenue of $1.79 billion was also way off estimates of $2.87 billion.
Kinder Morgan attributed the declines to low prices for crude oil, lower transportation volumes in the refined products business, and reduced steel handling in the company’s bulk terminals business. We wanted to see how this compares to what is expected for earnings and distributions (dividends) competitors such as Enterprise Products Partners LP (NYSE: EPD) and Plains All American Pipeline LP (NYSE: PAA). Given the results for Kinder Morgan, there are still questions on the earnings versus the dividends....MORE