Billionaire Michael Platt’s BlueCrest Grows More Bullish on Energy

BlueCrest Capital Management, founded by billionaire Williams Reeves and Michael Platt in 2000, is one of the largest hedge fund firm in Europe. According to its last submitted Form ADV, it managed regulatory assets worth almost $60 billion, as of March 30. The firm recently submitted its 13F filing with SEC for the reporting period ending June 30, revealing a long US equity portfolio worth $2.41 billion. The filing revealed that during the second quarter BlueCrest’s equity portfolio had a quarterly turnover 102.64% and that its top-10 equity holdings at the end of that period amassed 30.80% of the value of its equity portfolio. An interesting information that emerged from the fund’s recent filing was that it became increasingly bullish on the energy sector during the second quarter. While at the end of March energy stocks accounted for only 9% of the value of the BlueCrest’s equity portfolio, at the end of June,  18% of the fund’s portfolio value was amassed by them. In this post, we will take a look at BlueCrest’s top-five stock picks while entering the third quarter, four of which belong from the energy sector.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points in our backtests that covered the period between 1999 and 2012 (see the details here).

#5 Royal Dutch Shell plc (ADR) (NYSE:RDS.A)

– Shares Owned by BlueCrest Capital Management (as of June 30): 231,822

– Value of Holding (as of June 30): $12.80 Million

BlueCrest Capital Management boosted its stake in Royal Dutch Shell plc (ADR) (NYSE:RDS.A) by 286% during the second quarter. Another hedge fund covered by us that increased its stake in the company during that period was Phill Gross and Robert Atchinson’s Adage Capital Management, which upped its holding by 76% to 1.32 million shares. Royal Dutch Shell plc (ADR) (NYSE:RDS.A)’s stock has lost 13% of its value so far in the current quarter, however, it is still trading up 4.39% year-to-date. The European oil giant currently pays a quarterly dividend of $0.94 per share, which based on the last trading price of its stock translates into a lucrative annual dividend yield of 7.83%. According to some analysts who track the stock, at current oil prices Royal Dutch Shell plc has a leeway of only one year to fund its current dividend because the company has been using a combination of debt and asset sales for it and after a year the rising debt will put too much pressure on its balance sheet. During the second quarter, the ownership of Royal Dutch Shell plc among funds covered by us increased by three to 37 and the aggregate value of their holdings in it jumped by 87% to 41.71 billion.

#4 BP plc (ADR) (NYSE:BP)

– Shares Owned by BlueCrest Capital Management (as of June 30): 377,562

– Value of Holding (as of June 30): $13.41 Million

BP plc (ADR) (NYSE:BP) jumped several spots in BlueCrest Capital Management’s equity portfolio during the second quarter owing to a over ten-fold increase that the fund made to its stake in the company during that period. The company has lost over 55% of its market capitalization since mid-2014, though its stock is currently trading up by 7.35% for 2016. Like Royal Dutch Shell, BP plc (ADR) (NYSE:BP)’s stock also sports a lucrative dividend yield at present, of 7.14%, and several analysts fear that the rising debt burden on the company will force it to slash its quarterly divined soon unless there is an improvement in the macros or it ramps up its disinvestment program. On September 15, Reuters reported that at least three companies are set to bid for BP plc’s 50% stake in Chinese petrochemicals joint venture SECCO, whose sale is expected to bring the company more than $2 billion in proceeds. The number of hedge funds covered by us long BP plc increased by six to 40 during the second quarter and the aggregate value of their holdings in it skyrocketed by 156.6% to $1.76 billion during that time.

#3 American Homes 4 Rent (NYSE:AMH)

 – Shares Owned by BlueCrest Capital Management (as of June 30): 679,310

– Value of Holding (as of June 30): $13.91 Million

American Homes 4 Rent (NYSE:AMH) is the only stock among BlueCrest Capital Management’s top five stock picks that doesn’t belong to the energy sector. While BlueCrest increased its stake in the company by 7% during the April-June period, the funds covered by us collectively became less bullish on the REIT as its ownership among them declined by three to 14 during that time and the aggregate value of their holdings in it fell by $78.8 million to $447.79 million. American Homes 4 Rent (NYSE:AMH)’s stock has seen a stellar rally this year, appreciating by 26.8% year-to-date, and recently hit its lifetime high at $22.99. Earlier this month, the company announced a secondary offering of 43.5 million shares on behalf of Alaska Permanent Fund Corporation. Although American Homes 4 Rent didn’t sell any stock itself and received no proceeds, its stock has been negatively impacted since the announcement of this offering. On September 8, analysts at Raymond James Financial Inc. reiterated their ‘Buy’ rating on the stock and also boosted their price target on it to $26 from $24, which represents a potential upside of around 23% from its current trading price.

#2 Halliburton Company (NYSE:HAL)

– Shares Owned by BlueCrest Capital Management (as of June 30): 379,640

– Value of Holding (as of June 30): $17.19 Million

Amid a 26.8% rise in Halliburton Company (NYSE:HAL)’s stock during the second quarter, BlueCrest Capital Management increased its stake in the company by 223%. Halliburton Company (NYSE:HAL) is expected to report its third quarter numbers in the middle of the next month and the current consensus estimate among analysts is for a per share loss of $0.07 on revenue $3.89 billion. For the same quarter of the previous year, the company had reported EPS of $0.31 on revenue of $5.58 billion. On September 7, analysts at Credit Suisse released a note asking clients to not expect too much from the third quarter results of oil services company. They wrote, “While an impressive move off the bottom, the U.S. horizontal rig count is still only 31% of its 2014 average. Not going down anymore is fabulous. But it doesn’t translate into doing well very quickly.” The analysts also noted that technology and a more efficient client base makes Halliburton Company the top “demographic” play over Schlumberger Limited in the near term. At the end of June, there were 62 investors from our database by us that were long Halliburton Company and the aggregate value of their holdings in it amounted to $2.26 billion.

#1 CNOOC Ltd (ADR) (NYSE:CEO)

– Shares Owned by BlueCrest Capital Management (as of June 30): 1.42 million

– Value of Holding (as of June 30): $177.88 Million

With BlueCrest Capital Management increasing its stake in the company by a whopping 5,189%  during the second quarter, CNOOC Ltd (ADR) (NYSE:CEO) ended up becoming the top stock pick of the firm at the end of that period. Other billionaire investors that boosted their stake in CNOOC Ltd (ADR) (NYSE:CEO) during that time included Howard Marks of Oaktree Capital Management and Jim Simons of Renaissance Technologies. Shares of the China-based upstream oil holding company were on a downtrend in the period between 2013 and 2015. However, they have ended that downtrend this year and are currently trading up by 16% year-to-date. After the company announced last month that it has brought its cost to produce a barrel of oil by 15% to $34.86 in the first half of 2016, the Wall Street Journal carried an article highlighting that, by pushing down the exploration expenditure while maintaining its production target, CNOOC Ltd is fast depleting its oil reserve. On September 12, ExxonMobil and Oil Search announced that each of them has agreed to acquire 40% interests in two exploration licenses in Papua New Guinea from a company controlled by CNOOC Ltd for an undisclosed amount. The ownership of CNOOC Ltd among hedge funds covered by us remained unchanged at 12 during the second quarter, but the aggregate value of their holdings surged by 460% to $292.35 million.

Disclosure: None