Insiders Dumped $100 Million Into Enterprise Products This Week

Founding family of $EPD just dumped $100 million into the stock… …and company announced a 5.2% dividend hike.

— Charles Sizemore (@CharlesSizemore) Jan. 5 at 03:36 PM

Randa Williams, chairman and daughter of Enterprise Product Partners (EPD) founder Dan Duncan, just dropped over $100 million of her own money into EPD stock this week. And it’s not the first major purchase she’s made in the last 12 months:

InsiderDateSharesTrade PriceCost
WILLIAMS RANDA DUNCAN1/4/20163,830,256$26.11$100,008
WILLIAMS RANDA DUNCAN3/13/20153,225,057$31.01$100,009
WILLIAMS RANDA DUNCAN3/2/20151,498,055$34.00$50,933
WILLIAMS RANDA DUNCAN3/2/20155,992,220$34.00$203,735

Over the past year, Williams has invested nearly half a billion dollars of her own money into EPD. Now granted, she’s worth $5 billion, according to Forbes. But that still represents about 10% of her entire net worth.

I have no way of knowing when MLPs will officially bottom. It’s possible that they already have…or they may well take another leg down. But I can say this: The people running them are backing up the proverbial truck, so they clearly see brighter prospects ahead.

Oh, and by the way. Amidst all the talk of distribution cuts, EPD just announced that it planned to raise its distribution by about 5% in the coming quarter.

Disclosures: Long EPD.

Charles Lewis Sizemore, CFA, is the chief investment officer of investment firm Sizemore Capital Management. 

Kinder Morgan Insider Trading: Richard Kinder Drops $70 Million

Last December, I wrote that Kinder Morgan Inc (KMI) was a strong buy, citing the massive scale of insider buying as a bullish indicator.  After all, if the people running the company are accumulating shares, chances are good that they know something the rest of us don’t.

Well, little did I know that the Kinder Morgan insider trading had just barely begun.

Consider the recent aggressive insider buying by company founder Richard Kinder.  On February 24, Kinder bought nearly 200,000 shares of KMI, just four days after buying 100,000 shares.  This was on top of the 828,000 shares he bought in December.  In total, since June of last year, he has purchased an almost hard-to-believe 2,127,489 shares worth nearly $70 million at today’s prices. 

$70 million dollars.  And I should add, those shares were purchased on the open market and prevailing market prices; they weren’t executive stock options or some sort of dodgy inside deal.

Kinder Morgan is not a popular stock today.  Barron’s recently dropped a bomb  on the company with an article that questioned the accounting policies of sister company Kinder Morgan Energy Partners (KMP) and the relationship between KMI and KMP.

Is there any truth to the article?  Maybe.  I’m willing to accept that KMP’s accounting is overly aggressive.  But it has used the same accounting standards since the 1990s, and its practices are well disclosed in its partnership agreement.  There is no new news here.

At current prices, KMI yields nearly 5%, and it is one of my favorite stock picks for the remainder of 2014 and beyond.  Use the recent weakness to follow Richard Kinder’s lead.

Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

Kinder Morgan: Insiders Backing Up the Truck

Two weeks ago, I highlighted two REITs with large insider buying, American Realty Capital Properties (ARCP) and Annaly Capital (NLY).  Today, I’m going to continue this theme with a quick discussion of MLP general partner Kinder Morgan Inc (KMI).

The “Kinder Morgan companies” refer to Kinder Morgan Energy Partner (KMP), one of the largest and most popular MLPs among income investors; Kinder Morgan Management (KMR), a sister company that pays its dividend in stock; El Paso Pipeline Partners (EPB), a more recent addition to the Kinder Morgan family; and Kinder Morgan Inc., the general partner responsible for the operations of the whole lot.  Collectively, they are worth a hefty $90 billion in market cap.

Richard Kinder started the Kinder Morgan empire with pipeline assets tossed away by Enron, and he’s not your typical CEO.  He doesn’t take a lavish salary, and he actually reimburses the company for the cost of his health insurance premiums.  His income is based on the dividends he earns through his holdings of KMI.

Oh, and about that: Kinder just spent $18 million of his own money buying shares on September 9.

And he wasn’t the only insider buying.  On the same day, another officer bought nearly $100,000 in new shares.  And in the month of August, Fayez Sarofim, a director and one of the company’s biggest shareholders, bought about $15 million in new shares.

Like most income-oriented investments, KMI got hit hard as the market became fixated on Fed tapering.  But I’ll trust the inside knowledge of the company’s directors before I trust the collective “wisdom” of an emotionally-charged market.

Action to take: Buy share of KMI and collect the 4.5% dividend.  Plan on holding for 12-18 months or for total returns of 50%-100%.  Use a 20% trailing stop as risk management.

This article first appeared on TraderPlanet.

Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, he was long ARCP, KMI and WMB. Click here to learn about his top 5 global investing trends and get your copy of “The Top 5 Million Dollar Trends of 2013.”