First Sale of 2015 – Kinder Morgan

As you know that I’m on a race towards earning $3000 Per Month in 3000 Days and my sole goal has been to collect fantastic companies over that time frame to grow the passive income and becoming financially free by covering all my expenses. In pursuit of this, I’ve been buying positions in blue chip companies in my Portfolio, never wanting to sell them. However, I evaluated the current trends in market especially energy segment and found that my portfolio has become heavily weighted towards energy sector as I’d averaged down on some of these companies: Kinder Morgan (KMI), ONEOK Inc (OKE) and BHP Billiton (BBL) besides other super-majors.

I was led to believe that Kinder Morgan (KMI) will keep its faith with its shareholders but, 75% cut in dividends was a real bombshell to me and I’m sure the rest of DGI community and other investors. With the slide in oil prices and the probability of extended duration of low prices, I believe that energy companies have much more slide remaining and possibility of dividend cuts in other energy related companies remain high, though, sudden events could reverse the direction on a dime as well.

In order to protect the capital from further deterioration & reduce impact on passive income, I’ve decided to trim positions in some of these energy companies, not completely sell them. This will better align my portfolio. I sold 100 positions in KMI at $17.00 on 12/11. It was a tough decision for me to push that sale button, to say the least. I’ll deploy this capital in other shareholder friendly companies.

Full Disclosure: Long on above mentioned companies.

Thanks for reading.

What do think about my decision to sell KMI, wise move or committed a classical mistake of selling low?

6 thoughts on “First Sale of 2015 – Kinder Morgan

  1. I would say it’s a positive that you’re performing risk assessment, but not the ideal circumstances triggering the event. That being said, I suspect most of the bad news is baked into the price – but I had expected it to drop further. At least their exposure to the Chinese economy and mining accidents is less than BBL’s.

    • Hi Charlie,

      That’s exactly correct. I performed the risks that my portfolio was having in being overweight in KMI, OKE and BBL and that triggered their sale. Besides that KMI has been a big dampener and cut of 75% was a big deal. I think that both OKE and BBL are going to cut their not-sustainable dividends and we will see more slide in their share prices. Thanks for stopping by and commenting.

  2. I understand the reasoning for selling some KMI. Like you I’ve been way overweight energy for a while now and as such stopped adding to many energy names because of that. Even after the share price decline energy still accounts for 13% of my capital and 16% of my dividends. KMI is positioned much better for sustainable growth but the dividend yield is lackluster at around 3% and dividend growth might be slow as well. I’m considering some tax loss harvesting on my KMI shares with plans to reacquire shares in the future. Since I work on the upstream side of the sector I’m hoping that the bloodshed ends soon.

    • Hi JC,

      You are in same position as myself, my friend. I started averaging down on KMI little more aggressively last month or so. But, this blood bath in oil prices in really unprecedented in scope, scale and speed. I’m sure no one see it coming so soon and so fast. In that respect, timing was not perfect but over time, it will work out. The reason of my sale was that I was not comfortable with the weightage of these energy companies in my portfolio and wanted to whittle down to reasonable levels. I am still long on them. Upstream operations have seen a big down but should recoil at some point. Thanks for stopping by and commenting.

  3. It is always hard to make decisions like you just made. However, it should be harder to give advice on such a decision. My decision on KMI was determined for me when KMP was basically taken from me. When things don’t go my way, I feel that the best thing to do is distance myself from the issue. I felt that KMI was not right for me at the lofty prices in 2014, so I chose to wait. However, oil started to flounder soon after the KMI deal went through. I was having doubts all the way down, and those doubts are still in place. I have caught falling knives in the past and the results were horrible. So, I am staying away from KMI. If oil goes lower or stays low for a while, things might get worse. Also, rising rates keep KMI from borrowing money at favorable rates. So, because of this, I am staying out.

    Some of those reasons may be why you chose to sell, and maybe others are in the mix. Either way, you can find other investments that will allow you to build the income you are trying to achieve. Maybe you can look at KMI in a few months or even years to see if it fits your profile then.

    Good Luck!

    Keep cranking,

    Robert the DividendDreamer
    AKA — Seeking Dividends

    Follow me on Twitter– Seeking Dividends@DividendDreamer

    • Hi Robert,

      Appreciate your perspective on KMI and many of the reasons of selling KMI were really same: falling earnings, rising rates, cut in dividends and what not.

      I see that this is your first commen, so, welcome to this little corner of world @ Race2Retirement. My goal has been to invest in great blue-chip companies, unfortunately, KMI has been a big disappointment, to say the least. I remain optimistic about its long term prospect if only KMI can become more shareholder friendly. I agree KMP move was a big let down since folks were forced to do things that they did not expect.

      I guess pretty much most investors have encountered falling knives at some point, question is what extend that damages a portfolio and diversification becomes a key ingredient. Thanks for stopping by and commenting.

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