{"id":36724,"date":"2013-03-08T13:54:40","date_gmt":"2013-03-08T18:54:40","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=36724"},"modified":"2013-03-10T21:32:30","modified_gmt":"2013-03-11T01:32:30","slug":"the-right-way-to-buy-kinder-morgan","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/03\/08\/the-right-way-to-buy-kinder-morgan\/","title":{"rendered":"The Right Way to Buy Kinder Morgan"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

I\u2019ve been a big believer in midstream master limited partnerships (MLPs) for a long time.\u00a0 The U.S. domestic energy revolution has created massive new demand for pipeline infrastructure, and a lack of attractive income options elsewhere makes them doubly attractive to individual investors.<\/p>\n

As an asset class, MLPs are off to a great start in 2013.\u00a0 The JP Morgan Alerian MLP Index ETN (NYSE:$<\/span>AMJ<\/a>)<\/strong>, which is a good proxy for MLPs as a whole, is already up 12% this year, not including distributions.\u00a0 Not bad, given that the S&P 500 is only up 8%.<\/p>\n

Kinder Morgan Energy Partners (NYSE:$<\/span>KMP<\/a>)<\/b> is one of the oldest and most popular MLPs and along with Enterprise Products Partners (NYSE:$<\/span>EPD<\/a>)<\/b> is what I would consider the bluest blue chip of the group.<\/p>\n

But KMP is a terrible choice for most investors given that you can buy its sister security at a discount while also dealing with far less headache at tax time.<\/p>\n

Kinder Morgan Management (NYSE:$<\/span>KMR<\/a>)<\/b> is a hybrid security that pays its distribution in stock rather than cash. It\u2019s also \u201cIRA friendly\u201d and doesn\u2019t generate a cumbersome K-1. \u00a0It’s everything great about KMP but without the headache.<\/p>\n

For this added convenience, you might expect to pay a premium. But at current prices, KMR trades for nearly a 5% discount to KMP.\u00a0 Given your choice here, you\u2019d be a fool to buy KMP.<\/p>\n

There is one other option as well: Kinder Morgan Inc (NYSE:$<\/span>KMI<\/a>).\u00a0 <\/b>Kinder Morgan Inc. is the general partner that manages KMP and KMR.\u00a0 It\u2019s taxable as a corporation and pays a lower dividend at 4%.\u00a0 But if you believe in the growth of the industry, it\u2019s likely to be the most profitable of the lot. Due to the way that LP distributions are paid, the general partner can be thought of as a leveraged play on the underlying MLP.<\/p>\n

Frankly, in an MLP bull market you can\u2019t lose with any of these options.\u00a0 But for an investment in Kinder, I would recommend something along the lines of 2\/3 in KMR and 1\/3 in KMI.<\/p>\n

Disclosures: Sizemore Capital is long KMR and KMI. \u00a0This post first appeared on TraderPlanet<\/a>.<\/p>\n

SUBSCRIBE\u00a0<\/a><\/strong>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

The post The Right Way to Buy Kinder Morgan<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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