Evaluating 4 Short Ideas Derived From T. Boone Pickens' Portfolio Moves

by: Insider Monkey

Billionaire T. Boone Pickens made a name for himself in the oil industry before venturing into the hedge fund game via his BP Capital. His experience has served him well. From mid-2001 to mid-2007, Pickens fund averaged returns of roughly 38 percent a year. On October 27th, we published an article about four short ideas we noticed in Pickens' portfolio (read the article here). These ideas were derived by analyzing the stocks Pickens sold out completely. We don't know whether Pickens is shorting these stocks, but one thing is certain that he doesn't consider them as good long positions anymore. Let's take a look at how these companies are performing now.

ABB Ltd (NYSE:ABB) is involved in power and automation technology. Pickens had a $2.7 million position in ABB before he sold out in the second quarter. ABB had been a new position for Pickens. He had initiated a stake in the company during the first quarter. ABB was trading at $20.37 when we wrote the previous article. Today, the stock is trading at $21.30. It gained 4.57% vs. SPY's 13.36% gain. This was a good call on our part.

Going forward ABB seems like a better bet than its peers. Analysts give the company a one-year target estimate of $26.91 a share. Since at the end of the third quarter, the $48.78 billion market cap ABB has gained 23.42%. ABB is currently priced at 16.06 times its earnings and has a 3.20% dividend yield. Its closest competitor is Siemens AG (SI). The $83.99 billion market cap SI is roughly twice the size of ABB, but ABB has over 4 times the quarterly revenue growth, boasting 18.10% vs. SI's 4.90%. ABB is one of Ken Fisher's favorite picks. His Fisher Asset Management fund owned more than $354.19 million in the company at the end of the third quarter (see Ken Fisher's top picks).

A123 Systems Inc (AONE) develops, manufactures and sells battery systems, including lithium ion batteries. Pickens sold out of a $2.9 million position in AONE during the second quarter. AONE has been losing steadily since hitting a 52-week high of $10.77 on January 12. It was trading at $3.75 a share in late October and recently traded for $2.16 a share. It has lost 42.4% since we published our article.

AONE's biggest competitor is the $21.54B market cap Johnson Controls, Inc. (NYSE:JCI). AONE is just $272.33 million, but it has much higher quarterly revenue growth at 145.30% compared to JCI's 9.20%. D.E. Shaw is a fan. His fund had more than $4.8 million in the company after increasing its stake by 35% during the third quarter (check out D.E. Shaw's favorite positions).

Devon Energy Corp (NYSE:DVN) is an independent energy company involved in oil and gas exploration. Pickens had $13.6 million in DVN before he sold out in the second quarter. DVN is a $26.18 billion market cap company. It was trading at $66.19 when we published our article. It is now trading at $64.82 a share. It lost 2.07%, underperforming the S&P 500 index by more than 15 percentage points.

Analysts estimate that the stock will rise to $88.12 a share within the next 12 months. DVN's closest competitor is $14.01 billion market cap Chesapeake Energy Corp (NYSE:CHK). CHK has a high quarterly revenue growth at 54.10% vs. DVN's 28.90%, but DVN has much higher EBITDA at $6.59 billion, compared to CHK's $4.15 billion. Pickens opened a new position in Chesapeake during the third quarter, worth $7.76 million.

Oceaneering International Inc (NYSE:OII) provides engineered products and services to offshore oil and gas companies. Pickens had more than $13.65 million in OII before selling out during the second quarter. OII was trading at $43.96 a share in late October. It recently traded for $47.10 a share. It gained 7.14%, but underperformed the S&P 500 index by more than 6 percentage points.

OII has a market cap of $5 billion. OII's closest competitor is Ensco Plc. (NYSE:ESV). ESV is the larger of the two at $12.36, but they have nearly the same revenue; OII has $2.12 billion in revenue compared to ESV's $2.25 billion. Stephen Mandel's Lone Pine Capital had $213.57 million in OII at the end of the third quarter.

Overall these 4 short candidates had an average loss of 8.19% since we published our article. They underperformed the S&P 500 index by 21.5 percentage points. It seems like Boone Pickens knows when to sell stocks and investors may be able to use his sales as a trading signal.

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