T. Boone Pickens isn’t a hedge fund manager, but the billionaire oilman invests considerable capital in energy stocks and reports his positions on quarterly 13F filings. These filings, like those for hedge funds and other major investors, disclose long equity positions in U.S. stocks as of the end of the quarter. By analyzing 13Fs it is possible to develop profitable investment strategies. For example, we have found that the most popular small cap stocks among hedge funds produce an excess return of 18 percentage points per year on average (read more about our small cap strategy). Retail investors can also dig into individual filings to see what stocks major market players were buying. We looked through Pickens’ filing (see the full list of his stock picks and compared it to the one from the end of September; here are his five largest new stock picks:
Marathon Oil Corporation (NYSE:MRO) was the largest new holding reported on the 13F with a position of over 180,000 shares. Marathon is a $23 billion market cap oil and gas company, which places its valuation at 15 times trailing earnings. Its net income fell 41% last quarter compared to the fourth quarter of 2011 despite a double-digit percentage increase in revenue, though analysts see earnings coming back in the next couple years. Billionaire Ken Griffin’s Citadel Investment Group more than doubled the size of its own position in Marathon last quarter to a total of 8.7 million shares (check out more stocks Griffin was buying).
Pickens also liked Newfield Exploration Co. (NYSE:NFX), an exploration and production company with oil and gas assets in the onshore U.S, the Gulf of Mexico, and offshore locations in Asia. He bought over 210,000 shares of the stock. The stock price is down 34% in the last year as financial performance has been poor, but Wall Street analysts are bullish: the forward P/E, based on expected results for 2014, is only 8 and the five-year PEG ratio is 0.7. Caxton Associates, managed by billionaire Bruce Kovner, also initiated a position in Newfield (find Kovner's favorite stocks).
Learn more about three other stocks Pickens was buying: