On Tuesday, Aug. 20, Barron's noted that a number of key insider buys had taken place at a number of the more well-known energy firms. According to the article in which the transactions were highlighted, Kinder Morgan Management (KMR) CEO Richard Kinder purchased 11,900 shares of the company for just over $940,000, and ONEOK Partners (OKS) former CEO John Gibson purchased 12,200 shares of OKS for just over $600,000. In the wake of the recent flurry of insider transactions, I wanted to highlight a number of reasons why I remain bullish on the two above-mentioned energy companies.
Performance and Trend Status -- Kinder Morgan Management, LLC
On Tuesday, shares of KMR -- which currently possess a market cap of $9.39 billion, a P/E ratio of 49.45, a forward P/E ratio of 27.36, and a beta of 0.43 -- settled at a price of $79.61/share by the end of the day's session. Based on Tuesday's closing price of $79.61, shares of KMR are trading 1.28% below their 20-day simple moving average, 1.93% below their 50-day simple moving average, and 0.23% above their 200-day simple moving average. These numbers indicate a short-term and mid-term downtrend, as well as a minimal long-term uptrend for the stock, which generally translates into somewhat of a buying mode for most traders.
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What do I like the most about owning shares of KMR? To put things quite simply, it's the idea that I can establish an investment in the energy sector and not have to worry about taking as much of a risk as I would have if I were to directly invest in the underlying MLP. Not only am I able to reduce my potential risk, I'm also able to take advantage of some of the distributions issued to its unit-holders, since Kinder Morgan Management holds an equity interest in Kinder Morgan Partners (KMP).
For example, the last dividend paid to shareholders based on KMR's equity interest in KMP amounted to just under $0.0148/share. In my opinion, and from an income standpoint, this distribution certainly helps matters -- especially if someone is looking to reinvest their dividends or establish a conservative stream of income each quarter.
Performance and Trend Status -- ONEOK Partners, LP
On Tuesday, units of OKS -- which currently possess a market cap of $10.80 billion, a P/E ratio of 19.78, a forward P/E ratio of 18.23, and a beta of 0.40 -- settled at a price of $49.06/share. Based on Tuesday's closing price of $49.06, shares of OKS are trading 1.54% below their 20-day simple moving average, 0.61% below their 50-day simple moving average, and 7.29% below their 200-day simple moving average. These numbers indicate a fairly minimal short-term, mid-term, and long-term downtrend for the stock, which generally translates into somewhat of an all-around selling mode for most traders.
Were there any positive takeaways after the notable decline in distributable cash flow during the second quarter? As hard as it may seem to understand, ONEOK Partners did offer investors a number of positive takeaways during the second quarter. Of those catalysts, there were two that I strongly believe could to be very compelling contributing factors to the company's long-term growth. The first of these catalysts deals with the company's three-year EBITDA outlook, which "is expected to increase by an average of 15% to 20% annually when comparing the company's 2012 results with estimates that are currently calculated through the end of 2015." The second of the two supporting catalysts deals with the company's Natural Gas Gathering and Processing Segment, and the 18.84% increase in net income it gained during the quarter when compared to the year-ago period.
If both the company's EBITDA and its Natural Gas Gathering and Processing Segment can meet and/or exceed growth estimates over the next 24-36 months, I see no reason why investors should not pick up shares at their current price point. I strongly believe shares could see upside of 6%-11% over the next few quarters.