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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 (NYSEARCA:SPY) by about 5 percentage points.

CompanyName

Ticker

Value (x1000)

Activity

Return Since June

CHESAPEAKE ENERGY

CHK

30708

17%

0%

NOBLE CORP BAAR

NE

26546

-3%

-24%

B P PLC

BP

25824

-4%

-9%

PLAINS EXPLORATION & PROD

PXP

22310

-3%

-27%

MCMORAN EXPLORATION

MMR

20898

-3%

-35%

SANDRIDGE ENERGY INC

SD

20880

1%

-37%

WEATHERFORD INTL LTD

WFT

20704

13%

-17%

EOG RESOURCES INC

EOG

20179

-3%

-15%

APACHE CORP

APA

18387

-3%

-19%

NATIONAL OILWELL VARCO

NOV

16271

24%

-19%

SUNCOR ENERGY INC

SU

13471

-4%

-22%

HALLIBURTON COMPANY

HAL

13256

-3%

-21%

OCCIDENTAL PETROLEUM

OXY

12394

-3%

-21%

CANADIAN NATURAL RES

CNQ

12000

-3%

-16%

MURPHY OIL CORP

MUR

11874

-3%

-23%

SCHLUMBERGER LTD

SLB

11735

New

-12%

HESS CORP

HES

11532

New

-26%

DAWSON GEOPHYSICAL CO

DWSN

8642

-3%

-2%

GASTAR EXPLORATION LTD

GST

4124

-3%

14%

APPROACH RESOURCES INC

AREX

2252

-3%

-24%

ABB LTD

ABB

Sold Out

-22%

A123 SYSTEMS INC

AONE

Sold Out

-25%

DEVON ENERGY CORP

DVN

Sold Out

-18%

OCEANEERING INTL

OII

Sold Out

-6%

In fact, out of Pickens’ top stock picks, only one has produced a positive return; Gastar Exploration Ltd (NYSEMKT: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 (NYSE: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 (NYSE: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 (NYSE: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.

Source: Billionaire T. Boone Pickens' Favorite Stocks