No love for midstream
Probably the most glaring omission from BP Capital’s portfolio is midstream and pipeline companies. There are two possible reasons:
Much of the midstream business is in a mad scramble to build out pipeline networks across the United States, and the massive buildout to accommodate the boom in domestic energy production has these companies hurting, with so much capital tied up in new projects.
BP Capital may be averse to investing in a partnership company. All of its current holdings are in common shares, and a majority of midstream companies in the U.S. and Canada are master limited partnerships. This is pure speculation; however, MLPs such as Vanguard Natural Resources, LLC (NYSE:VNR) have stated during conference calls that they’ve seen institutional investors shy away from the partnership structure.
What a Fool believes
There are few investors who know the energy space better than Pickens, and those looking for investment ideas in the energy space would be wise to check out what BP Capital is buying from time to time. Is there’s anything investors shouldn’t do that Pickens does, it’s to move assets as much as he does. From the previous quarter to this one, BP Capital jettisoned 22% of its holdings in four companies and picked up five new ones. Shuffling your own portfolio around like that will eat into your gains. Sometimes it’s just better to stick to your guns, the way Buffett does, and hold for the long term.
The article If You Want to Invest In Energy, Don’t Follow Warren Buffett originally appeared on Fool.com is written by Tyler Crowe.
Fool contributor Tyler Crowe has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway, Clean Energy Fuels, National Oilwell Varco, and Range Resources and owns shares of Berkshire Hathaway, Freeport-McMoRan Copper & Gold, and National Oilwell Varco.
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