Seeking Alpha
Profile| Send Message|
( followers)  

T. Boone Pickens is one of the most popular businessmen in the U.S. He frequently can be seen on TV, particularly when it comes to energy-related issues. Pickens, who became a billionaire through his oil investments, has a vast amount of business experience in the energy sector. He was the king of takeovers and acquisitions during the 1980s. After taking over the Hugoton production company, Pickens led the acquisitions of Pioneer Petroleum and of Tenneco's mid-continent assets.

Pickens is an activist; he introduced the Pickens Plan, which aims to reduce America’s dependency on foreign oil. He launched an advertising campaign, worth $82 million dollars to promote this plan. A radical suggestion was to introduce a wind-power corridor from Texas to Canada. So far, the plan has not received much attention from the administration.

BP Capital, founded by T. Boone Pickens, is a relatively small hedge fund that specializes in mainly energy stocks. While Pickens has significant private investments in alternative energy, BP Capital is still bullish about oil. Energy investments amount to near 92% of BP Capital's portfolio. According to the latest filings of BP Capital submitted to Edgar-Online, Pickens made 2 new purchases, increased positions in 3 stocks, reduced positions in 19 stocks and sold out 6 stocks. I have examined his 5 big sells and 2 big buys from a fundamental perspective, adding my O-Metrix Scores where possible:

Big Sells

Company Name

Ticker

Shares Held

% Change

% of Portfolio

O-Metrix

Noble Corporation

NE

Sold Out

-100

0

2.34

Plains Exploration

PXP

Sold Out

-100

0

2.13

Apache

APA

Sold Out

-100

0

6.01

Chesapeake Energy

CHK

570,055

-44.88

9.87%

4.94

Murphy Oil

MUR

Sold Out

-100

0

5.28

Big Buys

Exxon Mobil

XOM

94,310

NEW

5.07%

4.38

Devon Energy

DVN

140,006

NEW

6.37%

5.26

Data obtained from Finviz/Morningstar and is current as of November 16. You can download O-Metrix calculator here.

Big Sells

Noble Corporation lost 40% of its market cap between April and August. However, after showing a double-bottom pattern, the stock rebounded, returning 20% in a month. Swiss-based Noble is a major offshore driller. The company provides services to oil and gas industries worldwide.

Pickens sold out his shares in the last quarter. While the company is pretty profitable with a gross margin of 45%, this is already priced by the market. Based on 8.30% EPS growth estimate, the stock has an O-Metrix score of 2.34. Fair value range is $36 - $66.

Plains Exploration showed a similar pattern to that of Noble. The stock literally collapsed between August and October, losing 50% of its market cap. However, it bounced back and returned 30% in a month.

BP Capital sold out shares in the last quarter. Based on 15% EPS growth estimate, the stock has an O-Metrix score of 2.13. Fair value range is $32 - $57. At a price of $36, the stock seems fairly priced, but there are much cheaper ones among the independent oil & gas companies.

Apache also collapsed between August and October. The shares fell all the way from $130 to $75 within this period. However, the stock seems to have recovered, returning 18% in a month. BP Capital also sold out Apache shares.

I am surprised to see Pickens' decision to unload Apache shares, since the company’s balance sheet is full with green flags. It has a gross margin of above 80% and sales increased by more than 40% in the last quarter. Based on 10.60% EPS growth estimate, the stock has an O-Metrix score of 6.01. Fair value range is $166 - $235. I think Apache is trading well below its fair value range.

Chesapeake Energy is one of the most widely followed stocks among investors. The stock showed a strong recovery since its dip in 2009. However, it is still trading well below its peak value before the sub-prime crises. Jim Cramer is bullish on Chesapeake, but Pickens reduced his holdings by almost 45% in the last quarter.

Chesapeake offers a yield of 1.37%. Jim Van Marteen suggests that the stock is undervalued compared with its peers, and I agree with him. Based on 10.30% EPS growth estimate, the stock has an O-Metrix score of 4.94. Fair value range is $32 - $53. It has almost 30% upside potential to reach its fair value. Analysts also agree with me. Their mean target price of $38 implies 50% upside potential.

Murhpy Oil is one of the safest energy plays, but the stock lost almost 24% in 2011. Pickens also sold out his holdings in the last quarter.

Murphy has a trailing P/E ratio of 10.51, and forward P/E ratio of 9.73. It also pays a yield of 2%. As Bret Jenson suggests, the stock is significantly undervalued. Based on 8.7% EPS growth estimate, the stock has an O-Metrix score of 5.28. Fair value range is $76 - $122.

Big Buys

It is quite interesting to see BP Capital initiated a new purchase of 94,130 Exxon Mobil shares in the last quarter. Exxon is the largest company in the world with a market cap of $380 billion. It is trading with single digit P/E ratios.

Exxon has a low Beta of 0.50 with a 52-week trading range of $66 - $87. Based on 5.90% EPS growth estimate, the stock has an O-Metrix score of 4.38. Fair value range is $104 - $137. At a price of $80, Exxon is obviously undervalued.

Devon Energy is another big buy by T. Boone Pickens. BP Capital initiated a new purchase of 140,006 shares in the last quarter.

Devon is also cheap compared with most of its peers. Even after returning 12% in a month, the stock is still trading almost 30% below its 52-week high. Based on 11.20% EPS growth estimate, the stock has an O-Metrix score of 5.26. Fair value range is $90 - $142. Analysts' mean target price of $93.58 is near the lower end of my fair value range.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 5 Big Sells And 2 Big Buys By T. Boone Pickens