Chicago-based Copia Capital LLC is an energy and utilities-focused market-neutral hedge fund company established by Tim Flannery in 2002. It was founded as a partnership between the former utility and energy investment team from Chicago-based Trove Partners and Greenwich-based hedge fund FrontPoint Partners.
As of the most recent SEC 13-F filing for the September 2011 quarter, it held more than $250 million in U.S. equity assets. It has returned 6.90% annualized since launch in August 1, 2002, versus 3.3% annualized return for the S&P 500 during the same period. Its portfolio is fairly well diversified with more than 155 positions, with about 64% of its equity assets deployed in the energy sector and 20% in the utilities sector. About a third of its holdings are in large-caps, another 40% is in mid-caps and the remaining 25% is in small-cap equities. Their portfolio turnover is 150% to 250%, implying an average holding period of five to eight months.
Based on a review of available SEC 13-F filings, we determined that Copia Capital is bullish on the following undervalued stocks in the oil and gas industry (see table):
Marathon Petroleum (NYSE:MPC) engages in the refining, transporting and marketing of petroleum products. It operates six refineries in the Gulf Coast and Midwest regions that refine crude oil and other feedstocks, and distribute the refined products through barges, terminals and trucks. Copia added $10.8 million in Q3 to its $400,000 prior quarter position, their second largest buy during the quarter. MPC is undervalued, trading at 4.3 P/E on a trailing-twelve-month (NYSE:TTM) basis, at 1.3 P/B, and at 2.5 P/CF compared to the averages of 13.1, 1.5 and 9.4 respectively for its peers in the oil and gas refining and marketing group.
Besides Copia, other major funds that accumulated MPC shares in Q3 include AllianceBernstein, which added 6.2 million shares to its 12.9 million prior quarter position, and Lazard Asset Management that added 4.3 million shares to its 2.2 million prior quarter position. Also, basic materials and energy sector-focused funds such as $1.7 billion Passport Capital added a new 4.0 million share position in Q3.
Valero Energy Corp. (NYSE:VLO) is an independent petroleum refining and marketing company operating through three segments: refining, retail and ethanol. Copia added a new $4.1 million position in Q3. VLO is undervalued, trading at 4.5 P/E on TTM basis, at 0.8 P/B, and at 2.6 P/CF compared to the averages of 13.1, 1.5 and 9.4 respectively for its peers in the oil and gas refining and marketing group. Besides Copia, other major funds that accumulated VLO shares in Q3 included Goldman Sachs Group that added 8.8 million shares to its 2.1 million prior quarter position.
In the oil and gas refining and marketing group, besides MPC and VLO, Copia Capital dropped its $3.1 million position in independent petroleum refiner and marketer Hollyfrontier Corp. (NYSE:HFC), and it also dropped its $0.5 million position in independent oil refiner and marketer Western Refining Inc. (NYSE:WNR).
Halliburton Company (NYSE:HAL) provides a variety of equipment, and maintenance, engineering and construction services to the oil and gas exploration and production (E&P) industry, including reservoir completion and drilling services. Copia added a new $1.7 million in Q3. HAL is undervalued, trading at 14.1 P/E on a TTM basis compared to the average of 21 P/E for its peers in the oil and gas field services group. Also, it trades at a slightly expensive 2.9 P/B, and at 11.1 P/CF compared to the averages of 1.5 and 10.1 respectively for its peers. Besides Copia, other major funds that accumulated HAL shares in Q3 include Goldman Sachs Group that added 9.3 million shares to its 1.0 million prior quarter position, and Marsico Capital Management that added 5.9 million shares to its 15.5 million prior quarter position.
In the oil and gas field services group, Copia Capital also made its largest buy, adding a new $13.4 million position in Q3 in Schlumberger Ltd. (NYSE:SLB) that provides technology services, project management and information solutions to petroleum industry worldwide; and it also added a new $6.4 million position in Basic Energy Services (NYSE:BAS), a provider of well-site services to over 2,000 oil and gas drilling and production companies. Both SLB and BAS are trading at higher valuations than the averages for peers in the oil and gas field services group.
Patterson-UTI Energy Inc. (NASDAQ:PTEN) provides onshore contract drilling services to oil and natural gas operators in the U.S. and western Canada. Copia added a $5.8 million in Q3 to its $0.3 million prior quarter position. PTEN is undervalued, trading at 12.5 P/E on a TTM basis, at 1.4 P/B, and at 4.5 P/CF compared to the averages of 16.2, 1.3 and 7.8 respectively for its peers in the oil and gas drilling group. Besides Copia, other major funds that accumulated PTEN shares in Q3 included Allianz Global Investors of America that added a new 4.3 million position.
In the oil and gas drilling group, Copia Capital also bought a new $6.8 million position in Swiss offshore contract drilling services company Noble Corp. (NYSE:NE); NE trades at higher valuations than the averages for peers in the oil and gas drilling group. Also, Copia Capital dropped its $5.5 million position in Cameron International Corp. (NYSE:CAM), a provider of flow equipment products, systems and services to oil, gas and process industries worldwide.
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Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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