KMI: What To Do?

By | December 21, 2015

Kinder Morgan Inc (NYSE:KMI) has dropped from $44 in April 2015 to almost $15 in December 2015. KMI was one of the best “toll collecting” companies in the past and was thought to be immune from oil price collapse.

I have heard of the name Kinder Morgan for several years on the Intrnet and on TV. It was always one of the top companies to buy, recommended by many analyst and Jim Cramer. I thought KMI was undervalued when it dropped from the high of $44 to under $30. I picked up the stock in my IRA Portfolio when Richard Kinder said that the dividends will still grow at a rate of 6 to 10%, which was still a very good growth rate in my books. Initially, I thought the market was reading KMI wrong and I was hoping for a rebound. Then I realized I read the KMI stock wrong and became a bagholder.

Instead of a rebound, the stock continued sliding. Then their huge debt came to the spotlight. They will need to repay their debt and they will need to make some sacrifices. The dividend became one of the sacrifices. Shortly after my purchase, the company slashed 75% of their dividend payout. There was a brief (very brief) rally, but it was very short-lived because the stock has resumed the slide.

On December 16, the Feds had finally decided to raise the interest rate after many years of 0% interest rate. The market had widely anticipated this move and it had a huge relief rally. Many of the stocks soared on that day, except for KMI. This is strong indication to me that something is wrong with KMI. How can the whole market move up and KMI not react positively with the market. I fear that the fundamentals for KMI are not strong and therefore I’m questioning my holding.

I think KMI is “dead money” for the foreseeable future. I think I will look for an exit point now.

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