T. Boone Pickens founded BP Capital (so named for his initials; the hedge fund is not connected to British Petroleum at all) in 1997 after a lifetime in the oil industry. Pickens made his name through his company Mesa Petroleum and a series of successful acquisitions in the 1980s. Pickens was so successful at these maneuvers that Time Magazine put him on the cover in 1985. Pickens may have left the oil industry but he still focuses his attentions on that sector; the majority of BP Capital’s portfolio is centered on oil and energy companies.
Pickens’ strategy is to watch the direction of the energy markets and then bet big in futures and derivatives; while this strategy can produce big returns, it also means that there can be big losses. Pickens is pretty humble about these losses; he says, “Most of my ideas work, but the timing gets screwed up every once in a while.” Unfortunately, he has not had the same success with his hedge fund that he enjoyed as an oil company executive. Since the end of June, BP Capital’s top stock picks in its 13F portfolio underperformed the S&P 500 (SPY) by about 5 percentage points.
CompanyName | Ticker | Value (x1000) | Activity | Return Since June |
CHESAPEAKE ENERGY | 30708 | 17% | 0% | |
NOBLE CORP BAAR | 26546 | -3% | -24% | |
B P PLC | 25824 | -4% | -9% | |
PLAINS EXPLORATION & PROD | 22310 | -3% | -27% | |
MCMORAN EXPLORATION | 20898 | -3% | -35% | |
SANDRIDGE ENERGY INC | 20880 | 1% | -37% | |
WEATHERFORD INTL LTD | 20704 | 13% | -17% | |
EOG RESOURCES INC | 20179 | -3% | -15% | |
APACHE CORP | 18387 | -3% | -19% | |
NATIONAL OILWELL VARCO | 16271 | 24% | -19% | |
SUNCOR ENERGY INC | 13471 | -4% | -22% | |
HALLIBURTON COMPANY | 13256 | -3% | -21% | |
OCCIDENTAL PETROLEUM | 12394 | -3% | -21% | |
CANADIAN NATURAL RES | 12000 | -3% | -16% | |
MURPHY OIL CORP | 11874 | -3% | -23% | |
SCHLUMBERGER LTD | 11735 | New | -12% | |
HESS CORP | 11532 | New | -26% | |
DAWSON GEOPHYSICAL CO | 8642 | -3% | -2% | |
GASTAR EXPLORATION LTD | 4124 | -3% | 14% | |
APPROACH RESOURCES INC | 2252 | -3% | -24% | |
ABB LTD | Sold Out | -22% | ||
A123 SYSTEMS INC | AONE | Sold Out | -25% | |
DEVON ENERGY CORP | Sold Out | -18% | ||
OCEANEERING INTL | Sold Out | -6% |
In fact, out of Pickens’ top stock picks, only one has produced a positive return; Gastar Exploration Ltd (GST) returned a decent 14% since the end of the second quarter. The oil company is a top pick for the Par Capital Management fund headed by Paul Reeder and Edward Shapiro. Picken’s next highest return since June wasn’t a return at all; his position in Chesapeake Energy (CHK) outperformed the market significantly with its 0% return.
Pickens lost considerably in many of his other positions. He lost 37% through Sandridge Energy Inc (SD). Wallace Weitz of Wallace R. Weitz & Co owns a major position in the the oil company, as does George Soros of Soros Fund Management. Pickens also lost big on McMoran Exploration (MMR), losing 35%. However, hopes are high for McMoran. The esteemed Steven Cohen increased his position in the oil company by 239% last quarter. BP Plc was also among the stocks that performed relatively well.
We like Pickens but he has had some considerable losses lately (read about it here). While this could mean that his positions are about to turn around, the risk is just too great for most investors right now. However, Pickens does have a lot of insight in the energy industry, so he is still a good hedge fund manager to watch.
Disclosure: I am long CHK.
