$50 billion market cap oil and gas company Suncor Energy Inc. (NYSE:SU) was another of SAC’s favorite stocks. Large oil companies tend to be trading cheaply, and Suncor is no exception with a trailing P/E of 10. This is particularly confusing in Suncor’s case as the company has a strong position in the booming Alberta oil sands and actually reported an increase in earnings (though not in revenue) last quarter compared to the third quarter of 2011, rare for a large energy company. We think that we’d like to take a closer look at the company to be more confident about that earnings growth, but at this point it looks attractive at current prices.
The fund also liked Superior Energy Services, Inc. (NYSE:SPN), which provides equipment and services to oil and gas drillers (including for their offshore operations). Revenue and net income were much higher in the third quarter than a year earlier, yet the market apparently believes that there’s no future growth here as the stock is valued at 9 times earnings after having dropped 22% in the last year. The sell-side expects at least some growth to continue, and the five-year PEG ratio is only 0.4. That’s enough to merit consideration, though we’d certainly research why the market is so negative on Superior’s prospects before buying.
Cohen was willing to buy, of all things, an iron ore and coal stock during the third quarter: SAC added heavily to its position in Cliffs Natural Resources Inc (NYSE:CLF) and closed September with 2.7 million shares in its portfolio. Iron ore and metallurgical coal demand has been low, due to steel demand being low, which in turn has been brought about by macro concerns (the stock’s beta is 2.4). Revenue and earnings have plummeted, and even Wall Street analysts are forecasting lower net income in 2013. It’s still valued at 10 times consensus earnings for next year, and has upside if it can stabilize its business, but we think we’d avoid it for now.