While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Kinder Morgan, Inc. (NYSE: KMI ) gained slightly this morning after Goldman Sachs upgraded the midstream energy company neutral to conviction buy.
So what: Along with the upgrade, analyst Theodore Durbin planted a price target of $44 on the stock, representing about 26% worth of upside to yesterday's close. So while momentum traders might be turned off by Kinder's price decline over the past year, Goldman's call could reflect a sense on Wall Street that its growth prospects are now too cheap to pass up.
Now what: According to Goldman, Kinder's risk/reward trade-off is rather attractive at this point. "We are particularly bullish on the opportunity to provide midstream solutions out of Appalachia (Marcellus/Utica), where we believe Kinder is well positioned, as well as in gas-fired power generation, LNG, and Mexico exports," said Durbin. "KMI valuation screens attractive on 'yield plus growth' and on our SOTP, both on an absolute basis and relative to midstream C-corps." When you couple Kinder's attractive midstream position with its juicy 5%-plus dividend yield, it's tough to disagree with Goldman's upgrade.
Three stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, The Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.