One energy stock that is not oil vulnerable
Watch out! The oil market is getting slicker every day. Could there really be any energy companies worth owning anymore? Well, Jim Cramer has one stock up his sleeve that could answer that question.
"Here's my answer: Of course some energy companies are worth buying here, you just need to find the ones that have little to no commodity exposure and don't really feel the pain of lower oil," the "Mad Money" host said.
One pipeline play that has been a longtime favorite of Cramer is Kinder Morgan Incorporated. This stock has not taken as much of a hit from crude as some of the other players in the oil patch and even features a great dividend and growth prospect.
"After the hideous decline in crude over the past couple of months, Kinder Morgan is still less than a point off of its 52-week highs and I'm telling you it should be snapped up into any kind of weakness. In fact, I think the stock would be even higher right now if not for the wholesale collapse in oil."
The market's mistake could be an investor's opportunity.
Kinder Morgan recently completed its merger of three limited partnerships in the Kinder Morgan Family: Kinder Morgan Management, Kinder Morgan Energy Partners and El Paso Pipeline Partners. Unfortunately the closing of the deal coincided with the tumbling price of oil, which is why Cramer thinks it could have been higher.
So how could the largest pipeline network in North America be totally insulated from falling oil prices? This company basically acts as a toll-road operator, and they collect a fee for the volume of oil that they transport. That fee does not change, regardless of the price of oil and gas. Thus, the collapse in oil should not send investors running away from the stock.
Kinder Morgan's exposure to oil production is actually pretty small. The one segment of its business that is tied to crude are the carbon dioxide pipelines, however those represent less than 15 percent of the business.
For every $10 decline in the price of oil, Kinder Morgan's cash flow takes a hit of less than one percent. That's tiny!
"And when you consider the new, gigantic Kinder Morgan on its own terms, you're looking at a company that has the best growth characteristics and the highest yield of any of the big cap dividend stocks in the ," Cramer said.
The "Mad Money" host believes that this amazing situation just cannot last. If the stock stays at its low price range of $41, than that means the dividend yield will be 4.8 percent next year. That's absurdly high.
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Rather, Cramer believes that the stock price will rise so much that they will lower the yield as investors figure out that this is a key player in the energy space that is less vulnerable to oil prices as initially thought.
As Cramer's top play in energy, he thinks now is the time to get in on Kinder Morgan—before everyone else sees the value of a great business that is immunized against low oil prices—and the stock goes higher.
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