Oil industry legend Rich Kinder thinks we're in a 'sky is falling' market that makes no sense
First it was China fears. Then oil prices. Then European banks. It's as if every few weeks there is some new weight keeping stocks low.
According to Rich Kinder, co-founder and executive chairman of energy giant Kinder Morgan, all of the doom and gloom makes no sense.
"I think as far as the overall market is concerned, I said in the opening remarks it seems like a Chicken Little, the sky is falling market," said Kinder during his company's quarterly earnings call. "There seems to be no discrimination based on quality or based on virtually anything."
Kinder, a former executive at Enron who left years before the company's collapse, innovated the structure of energy companies by using master limited partnerships, which are basically entities that control the pipeline assets of an oil company and pay out profits to unitholders in a dividend.
Kinder went on to elaborate by using the example of Kinder Morgan and other oil-related stocks. The company's stock has had a precipitous decline of late, dropping 65% from $44.71 in April 2015 to $15.48 at Tuesday's open.
"But I think looking at where we are today, I mean I'm obviously very disappointed you would expect and where the KMI stock price is and the way the market has treated us," said Kinder. "We thought we took a great deal of uncertainty out of the equation [by cutting our dividend]."
In his opinion, the decline in oil prices have led investors to throw the baby out with the bathwater.
"It's just if oil prices go down, sell everything in the energy sector," said Kinder. "I think that's a very wrongheaded short-term view, but the market is what the market is."
Kinder goes on to point out that while revenues for the company are slipping, it has a positive cash flow of around $5 billion a year unlike other energy companies. Much of Kinder's analysis seems to address the broader market as well.
"The fundamentals don't seem to matter in this Chicken Little-The Sky is Falling market, but they should to long-term investors," he said.
It would seem that Warren Buffett - a noted long-term, fundamental investor - would agree. Buffett's Berkshire Hathaway disclosed a new investment in Kinder Morgan worth just under $400 million, according to a SEC filing released Tuesday.
In response Kinder Morgan shares jumped nearly 10% in pre-market trading Wednesday to $17.10.