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 | 61.5% | 14173 | |
DAWSON GEOPHYSICAL CO | 35.3% | 8365 | |
EOG RESOURCES INC | 29.8% | 16481 | |
CHESAPEAKE ENERGY CORP | 27.6% | 22888 | |
NOBLE CORP BAAR | 25.6% | 12019 | |
CLAYTON WILLIAMS ENERGY | 20.5% | 4845 | |
NATIONAL OILWELL VARCO INC | 20.2% | 11298 | |
OCEANEERING INTERNATIONAL | 17.7% | 11156 | |
HALLIBURTON COMPANY | 17.5% | 10993 | |
DEVON ENERGY CORP NEW | 16.8% | 11652 | |
SUNCOR ENERGY INC NEW | 16.0% | 13712 | |
Q E P RESOURCES INC | 10.3% | 17265 | |
PLAINS EXPLORATION & PROD | 9.7% | 19419 | |
CONSOL ENERGY INC | 9.4% | 4156 | |
GASTAR EXPLORATION LTD | 8.4% | 5040 | |
B P PLC | 5.2% | 22587 | |
MCMORAN EXPLORATION CO | 4.6% | 20082 | |
OCCIDENTAL PETROLEUM CORP | 3.3% | 7336 | |
DYNEGY INC DEL | 2.3% | 7840 | |
MURPHY OIL CORP | -3.2% | 3620 | |
WEATHERFORD INTL LTD NEW | -6.8% | 19958 | |
TRANSATLANTIC PETROLEUM | -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.
Disclosure: I am long CHK.
