We recently compiled a list of the Jim Cramer’s List of 7 Energy Stocks for the Trump Trade. In this article, we are going to take a look at where Kinder Morgan, Inc. (NYSE:KMI) stands against the other energy stocks.
Jim Cramer, the host of Mad Money, recently shared his views on the future of the natural gas and oil sectors under President-elect Donald Trump’s administration, alongside a majority Republican Congress. Cramer expressed his belief that companies involved in the natural gas ecosystem will thrive as a result of this new political landscape. He pointed out that the United States is rich in natural gas resources, which can be produced cheaply.
While some may believe the country’s position in terms of natural gas production is lower than expected, Cramer noted that, due to the Biden administration’s unfriendly stance toward fossil fuels and a weaker global economy, the natural gas industry had underperformed for much of the year. However, Cramer is optimistic that this trend will soon shift. He emphasized that although the U.S. has vast natural gas reserves, there has been a lack of infrastructure to effectively transport the resource, a problem exacerbated by the Biden administration’s resistance to new pipelines.
This, according to Cramer, has hindered the industry. He specifically criticized the pause on new liquefied natural gas (LNG) export authorizations, calling it a stunning setback for one of the country’s strongest sectors, which provides thousands of high-paying jobs. He went on to say:
“The betting is that Trump’s going to undo that on day one, giving new life to all these LNG projects that really have been stuck in limbo.”
READ ALSO Jim Cramer’s Game Plan: 13 Stocks in Focus and Jim Cramer’s Lightning Round: 9 Stocks in Spotlight
Since the election, natural gas prices have surged more than 70%, although Cramer noted that this increase was partly driven by a cold snap after a warm fall and the delayed start to winter.
“Seasonally, this is a good time for the commodity but I also think there’s some optimism about the future of the industry driving this move.”
Cramer then shared his broader outlook, saying:
“But here’s the bottom line: We’re hearing about all sorts of Trump trades right now, and many of these things have made insane moves in less than three weeks, to the point where, actually, they’re feeling precarious to me.”
He went on to recommend natural gas as a more sustainable investment, emphasizing that while many sectors have already surged in the wake of the election, natural gas stands out as an industry with long-term potential. Cramer believes that with the incoming administration’s supportive stance toward the fossil fuel sector, the natural gas ecosystem will continue to thrive for years to come.
He suggested that investors should look to buy into producers, pipeline companies, and LNG export stocks, all of which he believes have further upside potential now that the regulatory environment has shifted.
“I bet they keep running for the next couple of years, not months. They have all moved but they’re nowhere versus where they could go now that Biden’s anti-fossil fuel team has been broomed for one that is totally supportive of this industry.”
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during a recent episode of Mad Money. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of an oil and gas pipeline, spanning vast landscapes.
Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 42
Cramer suggested that pipelines could be a strong investment for those anticipating a natural gas boom under Trump, including Kinder Morgan, Inc. (NYSE:KMI),
“Other than the producers, what works if you’re betting on a natural gas renaissance under Trump… How about a pure play on pipelines? Much easier to build these under a Republican administration. There are plenty of good options here. I’ve been consistently bullish on Energy Transfer and Kinder Morgan, they yield 6.8% and 4.0%, respectively.”
Kinder Morgan (NYSE:KMI) is an energy infrastructure company, focusing on the transportation, storage, and processing of natural gas, petroleum products, and other commodities, along with CO2 production and related facilities. The company operates one of the largest natural gas transmission networks in the United States, holding an interest in or managing approximately 79,000 miles of pipelines and 139 terminals.
It also oversees 702 billion cubic feet (Bcf) of working natural gas storage capacity and generates about 6.1 Bcf of renewable natural gas annually, with another 0.8 Bcf in development. Additionally, the company transports more than 40% of the country’s natural gas production. The company has a strong project pipeline, with a backlog valued at $5.1 billion.
According to Kinder Morgan (NYSE:KMI) management, there are considerable growth opportunities in natural gas, particularly in areas such as LNG exports, cross-border exports to Mexico, power generation, and industrial demand. The company is currently involved in discussions about power opportunities that could exceed 5 Bcf a day, and its internal projections suggest an overall growth of approximately 25 Bcf a day in the natural gas market over the next five years.
Overall KMI ranks 3rd on Jim Cramer’s list of energy stocks for the Trump trade. While we acknowledge the potential of KMI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KMI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.