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Insiders Can’t Get Enough of Kinder Morgan Shares

Has there ever been a company as popular with its owners as Kinder Morgan (NYSE:KMI)? The gas pipeline operator’s stock is up 12% in 12 months (and paying a 4.9% dividend yield on top of that). It’s beating the S&P 500 soundly — and insider shareholders have nothing but love for the stock.

Earlier this week, we learned that Kinder Morgan CEO Steven Kean added 12,000 shares to his stake in the company, which is now rapidly approaching 7.3 million shares. Earlier in the month, company founder Richard Kinder made two purchases of his own, and of even greater size. Specifically:

– On June 5, Kinder purchased 100,000 shares of Kinder Morgan at just under $40 apiece.

– One week later, he came back and bought 100,000 more (at just under $39 per share).

– As a result, Kinder’s own stake in the company now totals more than 234 million shares — 12.6% of all shares outstanding.

So clearly, Mr. Kinder likes the stock that bears his name. His CEO seems enthusiastic as well. But should you be?

What does it mean to you?
Just one glance at the company’s financials should be enough to convince any value investor to answer “no.” Priced at 49 times earnings, but projected to grow those earnings at just over 4% annually over the next five years, this stock sells for a PEG ratio of more than 10 (11.7, to be precise). Even with the generous dividend yield, that sounds like a very aggressive valuation.

And yet, it’s hard not to be impressed by the trends in insider transactions we see at Kinder Morgan. Trends that go in only one direction: Up.

According to the SEC, there have been only three insider transactions in Kinder Morgan stock so far this year — all described as above, and all “buys.” In fact, if you go back as far as a year, every single insider transaction reported on Forms 4, has been of the “buy” variety, as insiders snapped up a total of 14,536,790 shares — and sold precisely zero.

If that’s not a vote of confidence from the folks who know the company best, I don’t know what is.


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