Feel the POWER of Energy Stocks

Hey There Income Hunter,


Energy stocks were positively buzzing on Tuesday


Goldman analyst Alessio Rizzi weighed in saying, “Adding energy equity exposure is attractive at this juncture, especially considering our constructive commodity view."

Meanwhile, Credit Suisse raised my No. 1 energy stock — Exxon (Ticker: XOM) — to a target price of $62, up from $52 … 

Plus another stock that had been on my radar came to life, so I JUMPED all over it.

Kinder Morgan (Ticker: KMI), which I was talking about just this weekend, is a midstream infrastructure leader …

Their focus is on natural gas and they have substantial assets in growing industries, PLUS a commitment to long-term shareholder rewards … 


The Power Incomes Valuation Model has Kinder Morgan trading at a 28% discount:


KMI Making Moves


Dividend Growth


The company managed a $990 million debt reduction year-over-year, with $2.4 billion in dividends paid to shareholders — a 9% increase over 2019 …

Kinder Morgan has ~$31 billion in long-term debt and a proven ability to steadily reduce this going forward, which will enable the company to substantially increase its dividends.


Interest Expense Savings


KMI had a 1.9x coverage of dividend with discounted cash flow. That means an extra $2.1 billion. The company's debt reduction saves the company ~$50 million in annual interest expenses.


My Trade



I like to focus on the 50-day moving average as support and resistance, so when KMI broke below and then reversed and cleared the 50-day MA to the upside, I pulled the trigger on the trade…

I was surprised how cheap the calls were outright, so I purchased an outright 15 strike call to September …

Here is the risk profile — and if KMI is able to rally up to its fair value price you would make $500 per contract net profit  …


Bring it Home


This oil rally is beginning to feel a lot like the 2014 version, when each price target was met and then surpassed all the way to $112.

It is definitely beginning to feel like a similar situation especially when you consider the spike in demand we may see by the summer as the economy reopens …

Keep filling your tank with undervalued energy stocks and get ready for a nice ride …

And as always …

Live and Trade With Passion My Friends,

Griff 

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