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Greenwich, CT-based energy and natural resources focused Hedge Fund Wexford Capital LP manages over $7 billion in assets, with over $4 billion in three hedge funds and the remaining in private equity funds. Its flagship Wexford Spectrum Fund LP and the complimentary Wexford Offshore Spectrum Fund with over $3.9 billion in total assets under management (AUM) generated 8% compound annual return in the last three years, and 14.1% compound annual return since inception in 1997 versus 1.4% and 5.6% compound annual returns for the S&P 500 during the three and 14-year periods respectively.
The firm was co-founded in 1994 by Chairman and CEO Charles Davidson, who also serves as the senior Portfolio Manager for the flagship Spectrum Funds and the Wexford Catalyst Funds. The double-digit long-term returns generated by Mr. Davidson along with the worst draw-down of 19% since fund inception in 1997 for their flagship Spectrum Funds ranks it among the top energy-focused Hedge Funds and puts Mr. Davidson in a near-Guru territory. Hence, it would benefit us to look at his most recent buy and sells and his largest holdings in the energy and natural resource sectors, so that we can use it as a starting point to inform our own thinking in investing in those sectors.
Per the latest SEC 13-F filing for the March 2011 quarter, the fund holds a diversified portfolio of over 800 positions. The fund is focused on energy and natural resources, with 39% of its assets deployed in the Energy Sector and 26% in the Natural Resources Sector. Almost half of the portfolio is in large-cap equities, 35% is in mid-cap equities, and the remaining 15%-20% is in small-caps. Furthermore, their portfolio turnover is extremely high at two to three times during a calendar year which means an average holding period of four to six months.

Of the 800 plus positions in their portfolio, the following are their high conviction picks and pans, and also high conviction holdings. in the energy and natural resources sectors based on the latest reported 13-F filing for the March 2011 quarter:
  • Energy Exploration and Production companies such as Marathon Oil Corp. (NYSE:MRO) is engaged in the exploration, production, refining, transportation and marketing of oil and natural gas worldwide; ConocoPhillips (NYSE:COP) is engaged in the exploration, production, refining and marketing of crude oil and natural gas worldwide; BP PLC ADR (NYSE:BP) is a British Company engaged in the exploration, production, refining, marketing and transportation of oil and gas globally; Chevron Corp. (NYSE:CVX) is engaged in the exploration, production and refining of oil and gas in the U.S. and worldwide; Suncor Energy Inc. (NYSE:SU) is a Canadian energy Company engaged in oil and gas upstream and downstream businesses in Canada and globally; Canadian Natural Resources Ltd. (NYSE:CNQ) is engaged in oil and gas exploration and production in western Canada, the North Sea and offshore West Africa; Occidental Petroleum Corp. (NYSE:OXY) is engaged in the exploration and production of crude oil and natural gas worldwide; Murphy Oil Corp. (NYSE:MUR) is engaged in the exploration, production, refining and marketing of oil and gas in the U.S. and U.K.; and Energy Partners Ltd. (NYSE:EPL) is engaged in the exploration and production of oil and gas primarily in the Gulf of Mexico region.
  • Coal mining Companies such as Alpha Natural Resources Inc. (NYSE:ANR) is engaged in the production, sale and processing of coal from 66 mines and 13 preparation plants in VA, WV, KY and PA; and Rhino Resource Partners LP (NYSE:RNO) is engaged in coal production from mines in central and northern Appalachia, the Illinois basin and western Bituminous region.
  • Energy Services Companies such as Nabors Industries Ltd. (NYSE:NBR) which provides oil, gas and geothermal land drilling, land well and work-over services worldwide; and Baker Hughes Inc. (NYSE:BHI) which provides wellbore products and technology services and systems to the global oil and natural gas industry.
  • Lyondellbasell Industries NV (NYSE:LYB) is a Netherlands-based manufacturer of polypropylene compounds, propylene oxide, polyethylene, ethylene and propylene.
  • Patterson-UTI Entergy Inc. (NASDAQ:PTEN) provides onshore contract drilling services to oil and gas exploration and production firms in the U.S. and western Canada.
Table
Company
Ticker
New or Increased or Decreased or Unchanged Position
Market Value at end of March 2011 Quarter
Change in Value from Prior Quarter
New Picks and Pans in Energy and Natural Resources Sectors
Marathon Oil Corp.
MRO
New Position
$ 26 million
$ 26 million
ConocoPhillips
COP
New Position
$ 22 million
$ 22 million
Alpha Natural Resources Inc.
ANR
New Position
$ 20 million
$ 20 million
Nabors Industries Ltd.
NBR
New Position
$ 14 million
$ 14 million
Baker Hughes Inc.
BHI
New Position
$ 13 million
$ 13 million
BP PLC
BP
New Position
$ 13 million
$ 13 million
Chevron Corp.
CVX
Added
$ 21 million
$ 13 million
Murphy Oil Corp.
MUR
New Position
$ 12 million
$ 12 million
Lyondellbasell Industries N V
LYB
Decreased
$ 18 million
$ 12 million
Patterson UTI Energy Inc.
PTEN
New Position
$ 11 million
$ 11 million
Occidental Petroleum Corp.
OXY
Decreased
$ 46 million
$ 10 million
Largest Holdings in Energy and Natural Resources Sectors
Rhino Resource Partners LP
RNO
Added
$ 215 million
$ 0 million
Energy Partners Ltd.
EPL
Added
$ 127 million
$ 0 million
Canadian Nat Res Ltd.
CNQ
Decreased
$ 72 million
$ 1 million
Suncor Energy Inc New
SU
Decreased
$ 20 million
$ 0 million
Credit: Historical fundamentals, including operating metrics and stock ownership information were derived using I-Metrix® by Edgar Online®, Zacks Investment Research, DailyGraphs®, Thomson Reuters and Briefing.com. Fund data, including assets under management and firm profiles are sourced mostly from Hedgetracker.com. The information and data are believed to be accurate, but no guarantees or representations are made.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my opinions and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not consider your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks, including loss of principal.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: Top Holdings of Wexford Capital's Energy and Natural Resources Fund