As investors, we love to see what stocks billionaires are buying. With their great wealth, we assume that there is great insight to be had by peering into the newest positions in their portfolios. One such investor, George Soros, added several energy investments during the latest quarter according to his latest From 13F filing. What caught my eye was the $88.4 million invested into five of those energy companies. Let’s drill down on these latest energy investments and see what insights we can gain.
The billionaire bought $22.5 million worth of the low-cost natural gas producer in the quarter. Over the past year, Ultra Petroleum Corp. (NYSE:UPL) has undergone a significant change, becoming much more disciplined in allocating its capital. It has done so by cutting its capital spending from $1.56 billion in 2011 to just $415 million this year which aligns it with current cash flow. That discipline should still deliver solid returns as the company projects that it can grow its production by 42% while doubling its EBITDA by 2016. There’s further upside thanks to its leverage to the price of natural gas, as Ultra Petroleum Corp. (NYSE:UPL) will benefit as the price rises, which makes it a big winner as we begin to export gas. By investing in Ultra Petroleum Corp. (NYSE:UPL), Soros is making the bet that natural gas prices are going higher.
Soros invested $8.4 million in Apache Corporation (NYSE:APA) during the quarter, as the billionaire was probably drawn to its cheap valuation. The company has a diverse asset base that includes some intriguing international assets. Apache Corporation (NYSE:APA) also has a long-term track record of steady growth, as its production has grown at a compound annual rate of 12% over the past 20 years while cash flow and adjusted earnings per share have grown by a compound annual rate in the high teens over the past decade.
While the past performance is nice, Soros probably has his eye on the future. Apache Corporation (NYSE:APA) is in the process of optimizing its portfolio, which includes jettisoning about $4 billion worth of assets while whittling away about $2 billion from its debt and buying back up to 30 million shares. Here Soros probably sees an opportunity to invest in a solid company that’s repositioning to pursue its most profitable growth opportunities, which should unlock value in the company’s shares.