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Thomas Kennedy

 
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  • Credit Default Swap ETFs Are Not Worth The Risk [View article]
    Hi Robert,

    You have some amazing analysis and descriptions of the product but I disagree with your conclusion (on WYDE, I agree 100% on TYTE). I, like Burt above, feel WYDE is a good hedge for a high yield or equity investment due to its high negative correlations with both. I also believe that the 100 securities covered by the fund are adequate to protect a diversified high yield bond fund, and that holding the 2 series (and being able to actively switch to new series over time) is a fair method of extending the duration of credit exposure.

    I am considering writing an article on WYDE; if I do, I plan on linking to this for a contrary perspective and its thorough analysis.
    Aug 22 03:47 PM | Likes Like |Link to Comment
  • What Is 'Quality' In A Stock? [View article]
    Very good, very approachable article with a lot of my favorite companies mentioned. As to your question on the Modern Portfolio Theory's factors (Profitability, Growth, Safety, and Payout), these follow very closely to that of the "justified P/E ratio" (see http://bit.ly/1lLALuu). This calculates, based on the classic gordon growth model for valuation, an acceptable P/E ratio for a company. The formula is P/E = (Payout ratio) x (1 + growth rate) / (discount rate - growth rate). This includes all of the 4 factors but profitability, which as described above, is the return on equity and a very important factor in determining long term growth rates.
    Apr 24 09:18 PM | 2 Likes Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    I hadn't seen his name before, but I always enjoy a good discussion. I've felt the quality of the comments on this site is far above any other I've seen and I appreciate comments that agree or disagree with my opinions as both can help me grow and learn as an investor.
    Jan 1 12:38 PM | 1 Like Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    It was $2,124 of KMI's "Debt Fair Value Adjustments" balance sheet item, less KMP's $1,332 to unconsolidated KMP.

    I understand the confusion; I was simply going for a valuation of KMI in terms of KMP and EPB, which is somewhat unique in that it is not possible for other companies. I was not trying, as you know, to value all 3 entities. Because of this unique property, there isn't a perfect term for this analysis and I felt the title accurately represented it.

    Thanks again for reading and commenting
    Jan 1 12:34 PM | Likes Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    Hello Phil,

    Thanks for your comments and bringing up some interesting points.

    As for the difference in debt figures, my numbers are different from the one you quoted since I included in KMI's portion of debt fair value adjustments.

    As far as breaking down the "Other Net Tangible Assets" further that wasn't done for simplicity. I broke out the investments that they will likely drop down shortly as I felt these should be separated and valued differently, and considered further. As for the other items owned by KMI, I decided that PP&E and deferred taxes, etc. are reasonably approximated at book value, especially since they didn't have a significant effect on overall valuation.

    I was considering breaking down the investment value of drop down assets further but instead decided to leave that element to the reader to decide. There was not enough of a breakdown for me to be comfortable approximating a fair value for these assets, especially off the quarterly reports, the annual broke these down better. With their $6.2 billion drop down done at book value I felt it was a safe choice to leave it at book value but to allow the reader the option to adjust the value further.

    I was also considering further valuing the IDRs but, as you know, this involves considerable assumptions. Instead of trying to predict the uncertain nature of KMP/EPB's future growth, acquisitions and other dilution, etc I felt it was worthwhile to simply show how much the market is valuing this growth through my sum of the parts analysis (and give the reader historic values and management's predictions). If I were to attempt to do a fair value analysis I would have not only done that, but also came up with a fair value for KMP and EPB instead of using the market values.

    This article was less about trying to value KMI, and more about showing where its value comes from. Its easy to disagree with the details, valuation isn't an exact science. I instead wanted to give the average layman the tools to make a more informed decision between Kinder Morgan's stock or its partners on their own instead of presenting my own opinion on the matter.
    Dec 22 08:01 PM | 1 Like Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    I am considering doing a write up on the warrants. I am a big fan of long term options, usually leaps, and use them regularly in my portfolio. I would like to do an analysis into what kmi and it's lps would look like at that point and come up with a fair value approximation.
    Dec 17 07:07 PM | 2 Likes Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    You could define risk by beta or look at it in absolute terms (in the article, kmi has excess risk equal to the growth premium). Either way a combination of kmi and it's lps allows more options for risk exposure.
    Dec 17 07:04 PM | Likes Like |Link to Comment
  • A Case For Holding Some Cash In This Market [View article]
    Well written article. I like and relate to the fashion analogy.
    Dec 17 02:02 PM | 1 Like Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    I'd recommend strongly to talk to a tax expert
    Dec 17 09:59 AM | 3 Likes Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    Thanks for reading. I was originally looking around hoping to find a write up like this. Since I couldn't find one I'd figured others may appreciate it too.
    Dec 17 09:58 AM | 1 Like Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    Thanks for reading and good point. There are some benefits to owning both as it lets you customize your risk profile.
    Dec 17 09:56 AM | Likes Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    I am quite impressed with the management. I wrote about them in the article I link to above in the second paragraph. Since it's the same management for each company I felt it wasn't a direct contributor to a decision between kmi vs kmp or epb.
    Dec 17 09:54 AM | 4 Likes Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    Kmr is similar to buying a stock under a dividend reinvestment plan. If you don't need the current income it's a good deal as it trades at a discount to kmp. I'd left it out in order to try to simplify the article a bit, maybe I should have tried to squeeze it in.
    Dec 17 09:48 AM | 1 Like Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    The equivalent of 7.4%
    Dec 17 09:45 AM | Likes Like |Link to Comment
  • Kinder Morgan Relative Valuation: KMI Vs. KMP And EPB [View article]
    Yeah, I was considering putting in a kmi paragraph but decided it strayed from the point of discussing kmis relative valuation. At current prices kmr yields the equivalent of 7.4%, just under epbs 7.5% yield. I'd have no personal preference between the 2 but I'd buy kmi before either.
    Dec 17 09:44 AM | 2 Likes Like |Link to Comment
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