Lucas Capital Management is a New Jersey-based energy focused hedge fund that was founded by Russell Lucas in 1996. The firm currently manages four hedge funds, three private equity funds and its legacy private wealth management business. Its Total Return Strategies fund aims to deliver an attractive total return through investments primarily in energy equities and secondarily in other natural resource related equities. The fund’s 13F portfolio totalled more than $130 million at the end of the third quarter.
Academic studies have shown that industry focused funds usually perform slightly better than generalist hedge funds, however, these funds continue to invest in their industries even during down cycles. We believe their stock picks are a good resource for investors who are interested in finding out stocks that stand out in a given industry. In this article we will take a look at Lucas Capital’s stock picks to find out what they think are the best stocks in the energy industry.
Hedge fund sentiment is an important metric for assessing long-term profitability. At Insider Monkey, we track over 700 hedge funds, whose quarterly 13F filings we analyze to determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (read more details here).
Sabine Royalty Trust (NYSE:SBR) is Lucas Capital Management’s largest holding constituting 5.67% of its portfolio. The fund holds approximately 201,034 shares of this stock at the end of the third quarter which was valued at $7.93 million. Sabine Royalty Trust (NYSE:SBR) is an express trust that owns interest in oil and gas. It owns interest in 5400 acres of producing and proved undeveloped oil and gas properties located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma and Texas. This trust has a market value of ~$560 million and is currently trading 10% shy of its 52 week high price. Sabine Royalty Trust (NYSE:SBR) reported revenues of $48 million in 2015 with net income of more than $45 million. The trust recently announced a monthly cash dividend of 11.7 cents per share in November. This distribution reflects the production of 33,645 barrels of oil in August and 485,265 million cubic feet of gas for July. Seven funds from our system held positions worth $13 million in this stock during the third quarter.