Stocks That Fund Themselves

In an old letter to clients, Tweedy Browne’s managers once stated that investors should be prepared to hold on to an undervalued stock for at least five years in expectation of the stock reaching fair value. Certainly, you can make the case that stocks can remain cheap for ten years or longer—Abbott Labs, Altria, and even Johnson & Johnson have proven that at different points in the past fifteen years. The only additional counsel given by Tweedy Browne is that the longer a stock remains undervalued after the five-year mark, the more likely it is that an investor is wrong about the valuation.

I don’t share the Tweedy Browne view, even though I … Read the rest of this article!

Kinder Morgan After The Merger

Kinder Morgan has been one of the best income investments in the world for people that discovered the company and acted upon it. The original Kinder Morgan—the one with the KMP ticker symbol—benefitted from a great confluence of factors that led to 20% annual returns between its 1997 founding and the November 2014 merger.

The story began with Richard Kinder getting passed up for CEO of Enron. He responded by offering $25 million for Enron Liquid Pipelines L.P. Without a doubt, it is one of the great ironies of American corporate history that the eventually bankrupt Enron sold off the most lucrative, cash-generative assets in its portfolio to avoid executive rivalry and focus … Read the rest of this article!