Given his multiple decades in the energy industry, first as an oilman and then as a fund manager, T Boone Pickens of BP Capital is widely followed by investors and analysts alike.
Although Pickens sold out of his oil positions near the price bottom in February (saying at the time that he was waiting for the most opportune moment to get back in), Pickens has since re-upped his exposure to several names in energy and his fund has done well because of it. According to our methodology, BP Capital’s 52 positions in companies worth over $1.0 billion, returned 16.2% in the second quarter and are up by 20.1% year-to-date. In this article, we take a closer look at five stocks T Boone Pickens increased exposure to in the second quarter, WPX Energy Inc (NYSE:WPX), Superior Energy Services, Inc. (NYSE:SPN), Kinder Morgan Inc (NYSE:KMI), Cheniere Energy, Inc. (NYSEMKT:LNG), and Sunoco LP (NYSE:SUN).
While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).
#5 Sunoco LP (NYSE:SUN)
– Shares held (as of June 30): 330,852
– Total Value (as of June 30): $9.91 million
– Percent of Portfolio (as of June 30): 3.93%
Pickens raised its position in Sunoco LP (NYSE:SUN) by 178% or 211,923 shares, in the second quarter to 330,852 shares, the position amassing 3.93% of the fund’s equity portfolio. Although new oil sand projects are not as cost-competitive as shale or conventional oil projects, Sunoco has one of the lowest cost of production for existing oil sand projects. If Russia and Saudi Arabia, who recently agreed to work together in the oil market, can shore up sentiment around the commodity and send Brent prices higher, Sunoco’s dividend might be safer. At current Brent prices, many investors doubt the stock’s dividend safety. Of the around 750 funds we track, 12 had a bullish position in Sunoco LP (NYSE:SUN) at the end of June.
#4 Cheniere Energy, Inc. (NYSEMKT:LNG)
– Shares held (as of June 30): 270,108
– Total Value (as of June 30): $10.14 million
– Percent of Portfolio (as of June 30): 4.02%
Pickens more than tripled his position in Cheniere Energy, Inc. (NYSEMKT:LNG) to 270,108 shares at the end of June from 83,292 shares reported as of the end of March. Although the LNG market is oversupplied both presently and over the next few years, the long term prospects on the energy form are still promising. As the crude crash from 2014 showed, a lot can also change in a couple years. If crude prices rebound, demand for LNG will likely increase and Cheniere’s prospects will improve. Activist Carl Icahn’s Icahn Capital LP, who owned over 32 million shares at the end of the second quarter, could also potentially play a part in unlocking value in the stock.