As the head of the hedge fund BP Capital Management, people want to know what stocks T. Boone Pickens is purchasing. Below are 5 that he picked up and added to his portfolio in the 2nd quarter of 2011. Not only that, but all five of these stocks currently trade at a price less than what Pickens paid for.
Schlumberger, Limited (SLB) – The first stock discussed in Pickens newest additions to his hedge fund is SLB. This is a new holding for him, as 135,822 shares were purchased at an average of $85.20 per share. This has a total impact of about 3.62% on the portfolio as a whole. The company does issue a dividend of $1.00 annually, which is a dividend yield of 1.50%. SLB has nice earnings per share of $3.80, which gives the company a price to earnings ratio of 17.70. This is slightly under the industry average of 23.6 and the S&P 500 at 18.0. Look at a couple of competitors, Baker Hughes Incorporated (BHI) and Haliburton Company (HAL), both trail SLB in earnings per share at $3.01 and $2.76 respectively. One area of concern for analysts is that SLB’s third-quarter profit did not meet analysts’ estimates. Part of the reason for the decline was due to the decrease of income from the Middle East and Asia. Analysts seem to agree with Pickens’ purchase, as the mean target price is estimated at $101.73 for the company.
Hess Corporation (HES) – Another new stock purchase for Pickens is HES. The purchase was for a total of 154,254 shares worth an average of $77.17. Similar to SLB, the hold has an impact of 3.56% to the portfolio. The stock does offer a dividend, although a low one, of $0.40 annually, which is 0.70%. HES has a very nice earnings per share of $8.20, which gives them a price to earnings ratio of only 7.30. This is about half of the oil & gas refining and marketing industry which stands at 13.7. Looking at one of the company’s biggest competitors Exxon Mobil Corporation (XOM), HES has a higher earnings per share than XOM which is at $7.59 and a higher price to earnings ratio of 10.56. One thing to look forward to with HES is the 3rd-quarter results that are expected to be released October 26, 2011. Analysts predict the company to report a net income of $1.39, which would be an increase of 6.1% from the 3rd quarter last year for the company. Based on all of these numbers, analysts predict that the stock price will continue to rise, with a mean target price of $86.67.
Chesapeake Energy Corp. (CHK) – In the 2nd quarter of 2011, Pickens also added to his position in CHK. The addition was 17.09% purchased at an average price of $30.82. This brings the total position to 1,034,284 shares. The addition also impacted the total portfolio by 1.38%. The beta for this stock is a little high at 1.44, meaning it’s more volatile than the market as a whole. The company does issue an annual dividend of $.035 annually, which is a yield of 1.30%. CHK currently has earnings per share of $1.38, which turns into a price to earnings ratio of 20.20. This is lower than the industry as a whole at 29.7, but higher than the S&P 500 which is 18.0. One sign a company is in a good position is when its insiders are purchasing the stock. This usually shows that executive management believes the stock is undervalued. In regard to its competitors, BP plc (BP) and Anadarko Petroleum Corporation (APC), CHK does trail each of these in earnings per share at $6.28 and $7.92, respectively. Overall the company is profitable that does issue a dividend and the insiders, as well as Pickens is currently buying for their portfolios.
National Oilwell VarCo Inc. (NOV) – Pickens also added to his portfolio by adding 23.83% to his position of NOV. The purchase brings the total shares owned of 208,040. The average price of the purchase was $72.86 and has a total impact on the portfolio of 0.97%. The stock is financially strong, with a quick ratio of 1.60 and a current ratio of 2.60. In addition, the company’s debt to equity ratio is only 0.03. As for the company’s earnings, NOV has earnings per share of $4.10, giving it a price to earnings ratio of 16.00. This is noticeably lower than the industry, which is at 23.6. Of these earnings, NOV issues a dividend of $0.44 annually, a 0.70% dividend yield. The mean target price for the stock is 90.84, although the research firm Standpoint Research has downgraded the company from Buy to Hold. Analysts estimate the company to report 3rd quarter results at $1.16 per share. NOV is doing notably better than its competitors. McDermott International Inc. (MDR), Weatherford International Ltd. (WFT) and SLB all trail in earnings per share at $0.85, $0.23, and $3.80, respectively.
Weatherford International Ltd. (WFT) – The final stock added to Pickens’ portfolio in the 2nd quarter is WFT. The average purchase price was $19.69. The addition of 13.21% brings the total shares owned to 1,104,225. The purchase had a total impact on his portfolio of 0.75%. The beta on this stock is the highest of the above at 1.81, making it almost twice as volatile as the market. The company does have good financial strength with a quick ratio of 0.90 and a current ratio of 2.00. Also, the company’s total debt to equity ratio is 0.75, making them not to financially leveraged with debt. Unlike other companies in the above list, WFT does not issue a dividend. Its current earnings per share are at $0.23 with an extremely high price to earnings ratio of 65.45, much higher than the industry at 23.6. However, one ratio that is noticeably low is the price to book ratio for the most recent quarter at 1.14. Analysts do predict that the stock’s price will rise with a mean target price of $23.80. The stock is trading closer to its 52-week low at $10.85 than the high at $26.25.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.