GMT Capital’s Top Stock Picks: Anadarko Petroleum, United Continental

GMT Capital was founded in 1990 to serve as the manager for a variety of funds which all focus on long-term value. The network of funds is managed by Thomas Claugus, who worked at Rohm and Haas Company for 17 years, including as the manager of the polymers division’s European operations. Claugus holds an MBA from Harvard Business School. GMT filed its 13F for the second quarter last month, disclosing a number of its long equity positions. Read on to see the top five holdings listed on the 13F or see our longer list of GMT’s favorite stocks.

GMT’s top position at the end of June was United Continental Holdings Inc (NYSE:UAL). Airlines are notoriously poor investments; United itself exited bankruptcy in 2006. However, the industry is beginning to look like a good value as recent consolidation (including the merger of United and Continental, and the potential for a suitor to buy American Airlines out of bankruptcy) may enable higher prices. Billionaire David Tepper’s Appaloosa Management owned 9.5 million shares at the end of June, while GMT owned 10.4 million. United Continental is expected to see a large pop in earnings next year, to $4.74 per share; at current prices, that is a forward P/E of only 4. The stock’s five-year PEG ratio is 0.4.

David Tepper

Canadian Natural Resource Ltd (NYSE:CNQ) was another of GMT’s top picks as the fund reported ownership of 8.5 million shares at the end of the second quarter. Canadian Natural Resources produces oil, natural gas liquids, and natural gas worldwide (though primarily in North America, as might be expected from its name), and so is tied to the prices of these commodities in the market. At a market capitalization of $36 billion, it trades at 12 times earnings (either on a trailing basis or when using sell-side estimates for 2013).

GMT owned 6.2 million shares of Celanese Corporation (NYSE:CE), a $6.5 billion market cap chemicals company which provides compounds including polymers, food and pharmaceutical preservatives, and acetyl products. With Claugus having worked at a polymers company, he may like Celanese based on his industry knowledge. As a basic materials company, Celanese is highly exposed to the broader market with a beta of 1.9. However, it is a candidate for a value stock with trailing and forward P/Es of 10 and 9, respectively. In its most recent quarter, revenue was down 4% compared to the same period in the previous year but earnings were up 3%.

Anadarko Petroleum Corporation (NYSE:APC) led our list of the ten energy stocks hedge funds are crazy about for the second quarter of 2012, as a total of 54 hedge funds and other notable investors in our 13F database reported a position in the stock. The 2.2 million shares that GMT owned, up slightly from its position at the end of March, made it one of these funds. Much of Anadarko’s business is centered in the onshore U.S., which is seeing a boom in production. Anadarko trades at 17 times forward earnings estimates as analysts expect that a recovery in natural gas prices will power its revenue and earnings higher.

The fund also liked $4.2 billion market cap designer and manufacturer of electronics equipment Flextronics International Ltd. (NASDAQ:FLEX). Flextronics’s business was down last quarter as it reported a 20% drop in revenue compared to a year ago, and a slight decline in income. It is another high-beta stock, carrying a beta of 2. Yet it is also another stock with good value potential, particularly if Wall Street analysts are correct in giving it optimistic earnings projections: the trailing P/E is 9, the forward P/E is 6, and the five-year PEG ratio is only 0.6.