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Stock Strategist

Three Ways to Invest in Kinder Morgan

KMI's IPO provides investors with a way to invest in KMP's general partner.

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With the IPO of Kinder Morgan Inc., investors can now choose between three stocks that derive their value from the same set of cash flows.  Kinder Morgan Energy Partners (KMP), the granddaddy of master limited partnerships, operates a diverse set of midstream assets that we believe would be nearly impossible to replicate.  Kinder Morgan Management (KMR) was created in 2001 as a way to provide investors a way to invest in Kinder Morgan without the tax complications of an MLP. Today's IPO of  Kinder Morgan Inc. (KMI) provides a third opportunity.

Wide-Moat Assets, Quality Cash Flows
Before we get into the structure of each of these stocks, it's important to understand the core assets that generate cash flows underlying all three investment opportunities. At its heart, Kinder Morgan is a pipeline company. The original partnership was created in 1997 by Rich Kinder and William Morgan, when the two got together to purchase a pipeline from Enron. Back then, Enron was busy inventing fabulous--and later fraudulent--business models that focused on "asset-lite" strategies. Enron just didn't see the value in old-fashioned hard assets. Kinder did.

Jason Stevens does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.