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Dallas, TX-based energy-focused BP Capital Management LP, founded in 1997 by T. Boone Pickens, manages $4 billion in assets, most of it in a commodity-focused hedge fund and a smaller $140 million in an equity hedge fund. Mr. Pickens holds a 46% interest in the firm, and has earned billion-dollar payouts from his investment in the firm twice, in 2006 and 2007. Besides his fame as an energy investor, Mr. Pickens is also well-known for his business leadership, philanthropy and political activism, including his “Pickens Plan” that he proposed during the election cycle in 2008 for reducing U.S. dependency on foreign energy that among other things also had a strong alternative energy component.

Since BP Capital’s total equity holdings went down by over half from $324 million at the time of Q2 filing, to $116 million at the time of the most recent SEC 13-F filing for the September 2011 quarter, we determined the percentage of his assets that were invested in each position to determine the stocks in his portfolio that he is most bullish or bearish about (see Table). The following are its top picks and pans by group:

Oil & Gas Exploration & Production Group: BP slightly decreased their weighting in the group to 49.5% of its portfolio in Q3 from 54.1% in the prior quarter. Within the group, they increased their weighting in Devon Energy Corp. (DVN) and McMoran Exploration Co. (MMR). DVN operates in the U.S. and Canada, and it trades at a discount forward 9 P/E, and at 1.2 P/B and 4.8 P/CF, compared to averages of 19.8, 5.3 and 20.9 for its peers in the U.S. exploration and production group. MMR operates in the Gulf of Mexico and in the U.S. onshore gulf coast area, and it currently generates losses, and it trades at 2.5 P/B and 15.2 P/CF. Also, BP Capital reduced its position in Q3 in U.S. oil & gas exploration & production companies Sandridge Energy Inc. (SD) and EOG Resources Inc. (EOG), and in international oil & gas exploration & production company Apache Corp. (APA).

Oil Well Services & Equipment Group: BP significantly decreased their weighting in the group to 15.8% in Q3 from 23.2% in the prior quarter. Within the group, it increased its weighting in Switzerland-based international drilling equipment and services company Weatherford International (WFT), and they dropped their $24 million position in Swiss offshore contract drilling services provider Noble Corp. (NE). Both WFT and NE trade at a discount to their peers. NE trades at 8-9 forward P/E, and at 1.2 P/B and 10.2 P/CF compared to averages of 9.9, 1.4, and 8.1 for its peers in the oil and gas drilling group. WFT trades at 9-10 forward P/E, and at 1.1 P/B and 17.8 P/CF compared to averages of 13.3, 2.2 and 14.1 respectively for its peers in the oil field machinery & equipment group.

Integrated Oil & Gas Group: BP Capital increased their weighting in the integrated oil & gas group to 20.0% in Q3 from 11.8% in the prior quarter. Specifically, BP Capital increased their weighting in British energy company BP Plc (BP) from 9.0% to 12.0%, and they added a new $7.5 million position in Exxon Mobil Corp. (XOM). BP trades at a discount 6.6 forward P/E, and at 1.2 P/B and 8.0 P/CF, compared to averages of 18.6, 1.3 and 5.0 respectively for the international integrated oil & gas group. XOM, in contrast, trades at a more premium 9.5 forward P/E, and at 2.4 P/B and 6.6 P/CF.

Table


(Click to enlarge)

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.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our "opinions" and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Source: T. Boone Pickens' Energy-Focused Hedge Fund's Top Q3 Picks