Billionaire Jorge Paulo Lemann’s Top Five Energy Picks: From Pioneer To Enbridge

3G Capital is a Brazilian investment firm founded in 2004 by Jorge Paulo Lemann, and currently managed by Alexandre Behring. The fund is focused on long-term value investments, and has “a particular emphasis on maximizing the potential of brands and businesses,” its site assures. 3G has repeatedly been on the spotlight for teaming up with Warren Buffett’s Berkshire Hathaway to acquire entire companies – rather than just portions, like it did with Tim Hortons and Burger King, which it then merged to create Restaurant Brands International Inc (NYSE:QSR), and Kraft Foods – later merge with Heinz to create Kraft Heinz Co (NASDAQ:KHC). Quite recently, 3G Capital filed its 13F for the first quarter of 2016, disclosing its long equity positions as of March 31; its portfolio, focused on energy (40%) and consumer discretionary (25%) stocks, was valued at roughly $1.5 billion at the end of the quarter. In this article, we will take a look at the fund’s new and increased energy stakes.

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#5 Enbridge Inc (USA) (NYSE:ENB)

Shares held by 3G Capital as of March 31: 1.0 million

Value of 3G Capital’s stake as of March 31: $38.88 million

Enbridge became 3G Capital’s twelfth-largest equity stake by the end of the first quarter, after the fund doubled its exposure to 1.0 million shares. The position, valued at almost $39 million, made it the third-largest shareholder among the funds that we track, only outranked by Daniel Bubis’ Tetrem Capital Management and Alec Litowitz and Ross Laser’s Magnetar Capital, which last disclosed ownership of 1.18 million shares and 1.66 million shares, respectively. Shares of Enbridge Inc (USA) (NYSE:ENB) were pretty volatile over the first quarter of the year, but ultimately surged by 17.23%. Over the second quarter, instead, the gains have only reached 1.26% so far. Last week, however, was a strong one for the stock, which rose helped by a first-quarter earnings beat. EPS of $0.76 came in $0.12 ahead of the Street’s expectations.

#4 Canadian Natural Resource Ltd (USA) (NYSE:CNQ)

Shares held by 3G Capital as of March 31: 1.5 million

Value of 3G Capital’s stake as of March 31: $40.52 million

Next up is Canadian Natural Resource, which occupied the eleventh spot in 3G Capital’s list by March 31. Between January and March, the firm started a new stake in the large cap independent crude oil and natural gas producer, which also felt the bullishness of Arosa Capital Management, led by Till Bechtolsheimer, which started a stake comprising 977,900 shares of the company, valued at $26.4 million by March 31. Canadian Natural Resource Ltd (USA) (NYSE:CNQ) has had a strong year, having returned almost 30% so far. Moreover, since the beginning of the second quarter, the shares have gained more than 5%, even though they were impacted by the raging wildfire in Alberta, Canada, in early May, which caused a 20% drop in the country’s oil output. Last week, Bloomberg reported that Husky Energy was close to selling an E&P package to Canadian Natural Resources as part of an asset divestiture plan; details have not transcended yet.

 

#3 Suncor Energy Inc. (USA) (NYSE:SU)

Shares held by 3G Capital as of March 31: 1.5 million

Value of 3G Capital’s stake as of March 31: $41.71 million

Another energy company that could count 3G Capital among its largest hedge fund investors was Suncor Energy Inc. (USA) (NYSE:SU). The firm disclosed ownership of 1.5 million shares of the company by the end of the first quarter; the stake was valued at roughly $41.7 million at the time. However, it should be noted that, over the January to March period – where the stock rose 7.79%, the stake was trimmed by 50%, making it fall from the fourth place in the firm’s list to the tenth position. Interestingly, it should be noted that Berkshire Hathaway was the largest hedge fund investor in the company by March 31, with 30 million shares or roughly $834.3 million in stock. Over the second quarter of 2016, Suncor has lost almost 6%, mostly impacted by the Canada wildfires, which have resulted in a 10.75% drop in the company’s stock price over the past month. More recently, Reuters reported that “The fire was still burning around Fort McMurray on Wednesday, with dry, windy weather expected to push it east, in the direction of Suncor and Syncrude facilities, prolonging a shutdown that has cut Canadian oil output by a million barrels a day.”

#2 Newfield Exploration Co. (NYSE:NFX)

Shares held by 3G Capital as of March 31: 1.5 million

Value of 3G Capital’s stake as of March 31: $49.87 million

Occupying the sixth spot in 3G Capital’s list was a newcomer, Newfield Exploration Co. (NYSE:NFX), which saw the fund acquire 1.5 million shares over the first quarter, as the stock experienced plenty of volatility. Another fund that seemed pretty bullish on the company’s prospects was John Labanowski’s Brenham Capital Management, which boosted its exposure by 900% over the first three months of the year, to 3 million shares. Interestingly, both funds are already reaping the benefits of their investments, as the stock has gained more than 18% since the quarter ended, helped by Wunderlich’s coverage initiation (with a Buy rating and $42 price target) in late April, and news about the acquisition of Oklahoma assets from Chesapeake Energy Corporation (NYSE:CHK) for $470 million.

#1 Pioneer Natural Resources (NYSE:PXD)

Shares held by 3G Capital as of March 31: 600,000

Value of 3G Capital’s stake as of March 31: $84.44 million

Finally, there’s Pioneer Natural Resources (NYSE:PXD), another newcomer in 3G Capital’s portfolio, which stood as the second-most valuable position at the end of the first quarter. While large, the $84.44 million stake did not make 3G Capital the largest shareholder among those we track. Firms with larger positions included Andreas Halvorsen’s Viking Global and Israel Englander’s Millennium Management, which last declared holding 2.55 million shares and 1.09 million shares of the company, respectively. Shares of Pioneer Natural Resources have been on the rise this year, having posted returns of almost 30%. In fact, over the second quarter alone, the gains surpassed 15.75%, largely driven by a first quarter earnings beat in late April, when the company reported a net loss of $0.64 per share, $0.11 slimmer than expected. On Wednesday, the Wall Street Journal named Pioneer among the firms that look best “after the oil bust,” while billionaire David Einhorn earlier recommended dumping the stock, calling it the “motherfracker.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.