Freeport-McMoRan Copper & Gold Inc. (FCX), National-Oilwell Varco, Inc. (NOV): If You Want to Invest In Energy, Don’t Follow Warren Buffett

I may be committing investing heresy by saying this, but following Warren Buffett in the energy space is not the way to go.

Yes, Warren Buffett is head and shoulders above the rest in the investing community and has a few decent energy investments the Berkshire Hathaway Inc. (NYSE:BRK.A) portfolio. If you are looking for possible investments in the energy space, though, you should look at another investor: T. Boone Pickens. He’s been in the energy industry for more than 60 years, and his hedge fund, BP Capital, is dedicated almost exclusively to energy investments. Let’s take a deeper look into BP Capital’s portfolio and see if there are any themes that can help us with our own investment decisions

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)

Don’t be afraid of natural gas
While getting into the natural gas market only last year might have seemed like a losing proposition, today several companies are selling at pretty deep discounts to their underlying assets. Pickens and his team have a portfolio with more than 60% of of their exploration and production assets centered almost exclusively on natural gas. Both Southwestern Energy Company (NYSE:SWN) and Range Resources Corp. (NYSE:RRC), two almost pure natural gas plays, make up more than 18% of BP Capital’s total holdings.

Anyone who has followed Pickens shouldn’t be surprised. Aside from his holdings with BP Capital, he also has a 20% personal stake in Clean Energy Fuels Corp (NASDAQ:CLNE) and has for several years been advocating for increased natural gas use through his Pickens Plan. It’s comforting to see that he and his partners at BP Capital are putting their money where their mouths are when it comes to natural gas.

Diversity is the spice of life
According to a recent energy report by Barclays, capital expenditures for exploration and production are set to reach a record $644 billion in 2013. With so much money pouring into the oil service industry, it would almost seem foolish to not be a part of it. Clearly, BP Capital sees a great opportunity in this sector, because it has bumped its holdings of National-Oilwell Varco, Inc. (NYSE:NOV) by 74% and picked up a considerable amount of shares in Weatherford International Ltd (NYSE:WFT) . Overall, BP Capital increased its total exposure to the oil services industry from 12% to 21%.

The big jump in oil services was part of a transition for BP Capital. Over the past quarter, it reduced its exposure to the E&P space from almost 75% to just under 60%. The bulk of that change was a transition toward services companies, but the group also picked up a pretty large share in Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) , the only company in the group’s holdings that isn’t considered a pure energy play.