We track a number of notable investors in our database of 13F filings, including top hedge funds, Warren Buffett’s Berkshire Hathaway- and billionaire oilman turned investor T. Boone Pickens, whose BP Capital commits capital almost entirely to energy related investments. We’ve used the information in our database to develop investment strategies, including our finding that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). Of course, we also like to look at what these various investors have been doing in their own portfolio. Here are some trades that Pickens was making, according to our comparison of his most recent 13F to previous filings:
Apache. Pickens initiated a position of about 120,000 shares in Apache Corporation (NYSE:APA) during the first quarter of 2013. The oil and gas exploration and production company has been struggling, reporting lower revenue and earnings in Q1 versus a year earlier, and is currently priced at a premium to the oil majors with a trailing price-to-earnings multiple of 17. Analyst estimates suggest that Apache Corporation (NYSE:APA) has more of an upside than its larger peers, however, resulting in a forward P/E of 8. Citadel Investment Group, managed by billionaire Ken Griffin, had been buying Apache Corporation (NYSE:APA) during Q4 2012 (see Griffin’s stock picks).
Selling Valero. At the beginning of 2013, BP Capital’s largest holding by market value was Valero Energy Corporation (NYSE:VLO), a $22 billion market cap oil and gas refining and marketing company. However, Pickens looks to have cut his stake by about 80% between January and March. Like many other companies in the industry, Valero Energy Corporation (NYSE:VLO) has been on a tear in the last year (it has nearly doubled in price) and yet is still trading at value levels with both its trailing and forward P/E multiples coming in at 7. Wall Street analysts are expecting at least some earnings growth going forward, which would make the stock undervalued if that turns out to be the case; the five-year PEG ratio is 0.8. Arrowstreet Capital had been another major shareholder at the end of 2012.
Getting out of oilfield services. None of Pickens’s ten largest positions are oilfield equipment and services companies, after he sold National-Oilwell Varco, Inc. (NYSE:NOV) and reduced his stake in Halliburton Company (NYSE:HAL) with none of those companies’ peers taking their places. This is interesting because both of these particular stocks had made our list of the most popular energy stocks among hedge funds during the fourth quarter of 2012. Halliburton Company (NYSE:HAL) is actually not looking that cheap at this time; while the sell-side is optimistic here as well, with consensus forecasts for 2014 implying a forward P/E of 11, revenue growth last quarter compared to the first quarter of 2012 was light. National-Oilwell Varco, Inc. (NYSE:NOV)’s recent results were more mixed, as higher costs offset an impressive performance on the top line resulting in a 17% decrease in net income.
Goodrich. In addition to Apache Corporation (NYSE:APA), the billionaire was buying Goodrich Petroleum Corporation (NYSE:GDP) between January and March of this year. Goodrich Petroleum Corporation (NYSE:GDP)’s market cap is only about $480 million, but on average 1.2 million shares of the stock are traded per day. Like Apache, it is an exploration and production company; its acreage is primarily in the Texas-Louisiana region in onshore shale plays. We’d note that Goodrich Petroleum Corporation (NYSE:GDP) has been recording operating losses in the past several quarters, and in fact has been missing estimates in the process as well.
Contra to Pickens, we think that oilfield services is an interesting industry at this time, and National Oilwell Varco seems to be a good place to start looking for value in that area. Refiners- including Valero Energy Corporation (NYSE:VLO) as well as its peers- also look to be priced attractively even after their run-up in price. As for the oilman’s E&P picks, Goodrich seems a bit dependent on a turnaround for our liking. Apache Corporation (NYSE:APA) is certainly better positioned, and if the company can match the trajectory analysts are looking for it would turn out to be a good value, but we aren’t sure it’s necessarily a better buy than the majors.
Disclosure: I own no shares of any stocks mentioned in this article.