Hedge fund sentiment is a metric that is underrated by retail investors, and our research shows that these money managers’ consensus picks can beat the market by a significant margin (see the details of our market-beating strategy). Of the 450-plus hedge fund managers we track at Insider Monkey, T. Boone Pickens is in the upper echelon, and one unique aspect of his fund, BP Capital, is that it holds a very concentrated equity portfolio.
At the end of the fourth quarter—the latest 13F filing period from the SEC—Pickens reported holding a little over $100 million in 19 different stocks. Let’s take a look at the hedge fund manager’s key moves over this period.
Meet the new “fab four”
We’re used to seeing a moderate level of quarterly turnover in Pickens’s portfolio, and Q4 was no different. BP Capital reported new stakes in Weatherford International Ltd (NYSE:WFT), Occidental Petroleum Corporation (NYSE:OXY), Newfield Exploration Co. (NYSE:NFX), and Marathon Oil Corporation (NYSE:MRO). The hedge fund’s total exposure to these stocks represented close to one-fifth of its entire equity portfolio at the end of Q4, and each is in the green in 2013 thus far.
Weatherford gives Pickens exposure to the oilwell services space on a global scale, and Occidental, Newfield and Marathon cover the oil and gas E&P industry in its entirety. Marathon’s presence in the oil sands segment is an added bonus, and it, along with Occidental, offers a dividend yield in excess of 1.9%. While Marathon seems like the best value of this four, it wouldn’t be a bad bet for “monkeys” to consider this group in tandem, as Pickens has demonstrated.
Range, National Oilwell Varco bull
In addition to these new positions, Pickens and BP Capital also upped their holdings in Range Resources Corp. (NYSE:RRC) and National Oilwell Varco, Inc. (NYSE:NOV) by 63.2% and 287.4% respectively.
What does Wall Street think about this duo?
Wall Street’s average price target on Range believes that a 9%-10% upside is possible from its current levels near $70 a share, while estimates for Oilwell Varco are more than twice as optimistic.
Lastly, we must also mention the companies that Pickens cut ties with last quarter: EOG Resources, Inc. (NYSE:EOG), Quicksilver Resources Inc (NYSE:KWK) and Whiting Petroleum Corp (NYSE:WLL). At the end of the third quarter, these stocks represented the 4th, 11th and 12th largest holdings in the hedge fund manager’s equity portfolio, and each were new positions in the second quarter of last year.
Shares of each oil and gas company have had a decidedly different fate of late, with EOG and Whiting returning an average of 10.8% year-to-date, while Quicksilver has fallen off a cliff to the tune of -24.1% since the beginning of the year. The common thread that exists between Whiting and Quicksilver is that they’ve missed analysts’ earnings estimates in at least three consecutive quarters.
EOG did recently beat the Street’s Q4 expectations, though it’s worth asking “how much of the positive news was already discounted in the stock,” according to Simmons & Co. analysts.
With a track record like Pickens’s, it’s worth paying attention to all of his moves, and his new “fab four” may provide a great buying opportunity for those looking to gain exposure to the energy sector.
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