We recently published a list of 11 Best Natural Gas Stocks To Buy Now. In this article, we are going to take a look at where Kinder Morgan, Inc. (NYSE:KMI) stands against other best natural gas stocks to buy now.
The United States of America is the Top Natural Gas Producing Country in the World, courtesy of horizontal drilling and hydraulic fracturing techniques, notably in shale, sandstone, carbonate, and other tight geologic formations. The country’s dry natural gas production reached 103.6 billion cubic feet per day (bcfd) in 2023, up 4.3% from 2022 and the highest for any year on record, dating back to 1930, according to 2023 Natural Gas Annual. The US was also a net exporter of natural gas for the seventh consecutive year in 2023, transporting gas to 42 countries during the year.
READ ALSO: 10 Best Liquefied Natural Gas (LNG) Stocks to Buy in 2025
After a stellar 2023, the US natural gas output slumped slightly last year due to prices falling to multi-decade lows, but production is expected to climb to 104.5 bcfd in 2025, as a period of strong demand and improved prices spark a resurgence in production. Analysts expect average annual gas prices to increase by more than 40% this year over the levels seen in 2024, as demand is projected to grow mainly due to a jump in LNG exports. The demand surge is largely attributed to new LNG export facilities, like Plaquemines LNG and Corpus Christi Stage 3, coming online, while the Golden Pass LNG project is also anticipated to begin operations by mid-2026.
Europe remains a top destination for American liquified natural gas. The continent has had to rely significantly more on imported LNG and less on gas delivered via pipelines from Russia since the Putin government’s invasion of Ukraine in 2022. The American LNG sector is also set to receive a significant boost after President Donald Trump issued an order last month to lift a freeze on new US licenses to export liquefied natural gas, making good on a campaign pledge to rescind the measure.
The country’s natural gas sector is also expected to benefit significantly from the ongoing AI boom and the accompanying data centers, as several dozen new gas-fired power plants are expected to be built in the US in the next few years. According to energy data provider Enverus, a total of 80 new gas power plants could be constructed in America by 2030, adding about 46 GW of new capacity – 20% higher than the gas capacity additions in the last five years. According to data from S&P Global Commodity Insights, if even a quarter of the projected data center load is supplied by gas-fired generation, this would translate to a 2% increase in total US gas demand in 2040.
The energy sector has witnessed considerable fluctuations over the last few months, surging by over 6% in November before declining around 10% in December. However, the broader energy sector (roughly 1/3rd of which is made up of natural gas companies) ended last year with a return of just 5.72%, significantly lagging behind gains of 25% by the wider market.
Methodology
To collect data for this article, we scanned Insider Monkey’s database of 900 hedge funds and picked the top 11 companies operating in the natural gas sector with the highest number of hedge fund investors in Q3 of 2024. When two or more companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year. Following are the Best Natural Gas Stocks to Buy According to Hedge Funds.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of an oil and gas pipeline, spanning vast landscapes.
Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 42
Kinder Morgan, Inc. (NYSE:KMI) is one of the largest energy infrastructure companies in North America. The company operates the largest natural gas transmission network in the US with 83,000 miles of pipelines, 141 terminals, and 700 billion cubic feet of working natural gas storage capacity. KMI makes its money typically by charging fees for the use of the capacity of its pipelines, terminals, and other assets.
Kinder Morgan, Inc. (NYSE:KMI) reported a revenue of $3.99 billion for Q4 of 2024, down from consensus estimates by $148.6 million, as it struggled with lower crude and condensate volumes transported through its pipelines. However, the company’s financial position remained strong as it generated $5.6 billion in operating cash flow and decreased its debt by $112 million during the year. KMI announced a quarterly dividend of $0.2875 per share, and as its new assets get integrated, the company’s dividend growth rate could be much higher in the future.
In the past few months, Kinder Morgan, Inc. (NYSE:KMI) has secured enough commercial contracts with customers to approve about $5 billion in new large-scale natural gas pipeline projects. It was announced this week that Entergy Texas has reached a transportation agreement with KMI to secure a steady natural gas supply, supporting industrial, commercial, and residential growth in Southeast Texas. The landmark arrangement, which was developed in collaboration with Golden Pass LNG, is part of KMI’s $1.7 billion Trident Intrastate Pipeline project. Expected to be operational in early 2027, the pipeline is expected to carry approximately 1.5 billion cubic feet per day of natural gas, with further possible expansions, ensuring a reliable gas supply for decades to come.
Overall, KMI ranks 9th on our list of best natural gas stocks to buy now. While we acknowledge the potential for KMI to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KMI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
