Billionaire T. Boone Pickens’s Long Term Picks: Occidental Petroleum Corporation (OXY), Apache Corporation (APA) & More

Product sales were down 6% versus a year earlier, and pretax earnings were essentially zero after adding back asset impairment charges (though this was partly because the decline in the core financials was supplemented by a loss on commodity derivatives). Here there are potential growth opportunities not only in natural gas, but also in the Canadian bitumen operations (where production is up almost 20% from its levels a year ago). Analysts are forecasting $5.11 in earnings per share in 2014, which would represent 33% EPS growth from the adjusted figures expected for this year. That implies a forward earnings multiple of only 11, but seems quite optimistic.

Occidental Petroleum Corporation (NYSE:OXY) rounds out our list of Pickens’s long term stock picks with the most recent filing disclosing ownership of about 80,000 shares. Occidental Petroleum Corporation (NYSE:OXY) is a significantly larger company by market cap than Apache or Devon, at $73 billion, and has a more prominent midstream unit. As with the other companies discussed here, Occidental Petroleum Corporation (NYSE:OXY) has been experiencing at least temporary declines in both sales and net income. The sell-side is looking for earnings growth next year, and so the trailing and forward earnings multiples are 17 and 12 respectively. Billionaire David Shaw’s D.E. Shaw reported a position of 4.6 million shares in its own 13F (find D.E. Shaw’s favorite stocks).

Apache and Devon seem to be somewhat interesting ways to play improvements in the natural gas market; we’d guess that Pickens (who is known for his “Pickens Plan” to increase the role of natural gas as a transportation fuel) has been bullish on these companies for this reason. While the forward valuations are low these stocks would be risky investments, since they do depend on demand growing fast enough to outstrip supply in what has been a hotly developed resource.

Disclosure: I own no shares of any stocks mentioned in this article.