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T. Boone Pickens is one of the hedge fund managers any investor should follow if they plan to invest in energy companies. The billionaire oilman turned to the fund management business in 1997. He earned more than $1.1 billion in 2006 and $2.4 billion in 2007.

Katherine Burton profiled Boone Pickens in her book “Hedge Hunters”. Boone Pickens’ most memorable quote from the book is: “Most of my ideas work, but the timing gets screwed up every once in a while." Here is an excerpt from the book about Boone Pickens’ performance until 2008:

“His energy stock hedge funds, which invest 90% in equities and 10% in commodities, averaged returns of about 38% a year through mid-2007 since starting in August 2001. His oil and gas commodities fund distributed about $2.8 billion to investors since he started it in 1997. About $1.6 billion of the $4.3 billion BP Capital manages is Pickens’s personal fortune. New clients pay a 1.75% management fee and 30% of any profit.”

Boone Pickens is extremely bullish about energy stocks. “You've got a similar situation to 2008, with extra supplies available in this market possibly less than 1 million barrels (per day) now. The Mideast is in real turmoil. It's on fire. The price can go anywhere. You're gonna see oil go up from here, and how high up I can't tell you, but if it went to 120, if it went to 150, that could all happen,” he said in a recent Bloomberg TV interview.

Boone Pickens’ 13F portfolio returned 15% since the end of last year, vs. SPY’s 4.6% return. His portfolio outperformed the market by more than 10 percentage points in less than three months. Here is how his extremely profitable energy bets performed so far this year:

Company

Ticker

Return

Value (x1000)

SANDRIDGE ENERGY INC

SD

61.5%

14173

DAWSON GEOPHYSICAL CO

DWSN

35.3%

8365

EOG RESOURCES INC

EOG

29.8%

16481

CHESAPEAKE ENERGY CORP

CHK

27.6%

22888

NOBLE CORP BAAR

NE

25.6%

12019

CLAYTON WILLIAMS ENERGY

CWEI

20.5%

4845

NATIONAL OILWELL VARCO INC

NOV

20.2%

11298

OCEANEERING INTERNATIONAL

OII

17.7%

11156

HALLIBURTON COMPANY

HAL

17.5%

10993

DEVON ENERGY CORP NEW

DVN

16.8%

11652

SUNCOR ENERGY INC NEW

SU

16.0%

13712

Q E P RESOURCES INC

QEP

10.3%

17265

PLAINS EXPLORATION & PROD

PXP

9.7%

19419

CONSOL ENERGY INC

CNX

9.4%

4156

GASTAR EXPLORATION LTD

GST

8.4%

5040

B P PLC

BP

5.2%

22587

MCMORAN EXPLORATION CO

MMR

4.6%

20082

OCCIDENTAL PETROLEUM CORP

OXY

3.3%

7336

DYNEGY INC DEL

DYN

2.3%

7840

MURPHY OIL CORP

MUR

-3.2%

3620

WEATHERFORD INTL LTD NEW

WFT

-6.8%

19958

TRANSATLANTIC PETROLEUM

TAT

-11.4%

6660

A123 SYSTEMS INC

AONE

-18.0%

4439

His best performing stock pick is Sandridge Energy. John Burbank’s Passport Capital, which was also extremely bullish about energy stocks, had Sandridge in its portfolio at the end of December. Burbank and Pickens also have Suncor in their portfolios. Suncor returned 16% so far this year. The other energy stock in Burbank’s portfolio, Transocean (RIG), returned 12.5%, underperforming these two stocks. Steve Cohen also had a relatively large position in Suncor.

Chesapeake Energy is also one of Pickens’ top performing stock picks. Carl Icahn built a $541 million position in CHK by the end of December and the stock returned 27.6% since then. Recently CHK insiders were also buying shares. We like stocks that are favored by hedge fund managers and corporate insiders. Value investor David Dreman is also among prominent fund managers who have CHK in their portfolios.

Source: T. Boone Pickens' Extremely Profitable Energy Bets