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 filing for the December 2011 quarter, it held $209 million in 13-F assets. It has returned almost 7% annualized since launch in August 1, 2002, versus 3.3% annualized return for the S&P 500 during the same period. Its portfolio is diversified with 75 positions, with about over 40% of its equity assets deployed in the energy sector and 35% in the utilities sector. About 40% each of its holdings are in large-cap and mid-cap equities, and the remaining 20%-25% is in small-caps.
We analyzed Copia's energy holdings in its Q4 2011 13-F to determine its highest conviction bets, selecting the largest buys and sells in size, where the buy/sell is also a significant proportion of its prior quarter position in that company. Based on that analysis, the following are its high conviction bullish positions, that are also trading undervalued compared to the peers in their group (see Table):
Whiting Petroleum Corp. (WLL): WLL is an independent oil and gas company, with primary interests in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast and Michigan regions of the U.S. Copia added a new $5 million position in Q4. Other leading institutions with large bullish bets on WLL in Q4 included Denver, CO-based mutual fund powerhouse Janus Capital Management, with $86.0 billion in 13-F assets at the end of Q4, adding 0.6 million shares to its 1.6 million share prior quarter position, and Atlanta-based investment powerhouse INVESCO Ltd., with over $650 billion in assets under management, including $174.4 billion in 13-F assets, adding 0.6 million shares to its 2.1 million share prior quarter position. WLL trades at a discount 10-11 forward P/E and 2.1 P/B compared to averages of 15.2 and 5.2 for its peers in the U.S. oil & gas exploration & production group.
Occidental Petroleum (OXY): OXY is engaged in the exploration and production of crude oil and gas worldwide. It operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing, and Other. Copia added $4 million in Q4 to its $2 million prior quarter position. Other leading institutions with large bullish bets on OXY in Q4 included billionaire star fund manager Stephen Cohen's hedge fund SAC Capital Advisors, with over $15.7 billion in 13-F assets, adding 1.2 million shares to its 0.2 million share prior quarter position, and Atlanta-based investment powerhouse INVESCO Ltd., with over $650 billion in assets under management, including $174.4 billion in 13-F assets, adding 0.8 million shares to its 5.3 million share prior quarter position. OXY shares currently trade at 9-10 forward P/E and 1.9 P/B compared to averages of 15.1 and 1.3 for its peers in the U.S. integrated oil and gas group.
Weatherford Intl Ltd (WFT): Geneva, Switzerland,-based WFT is a leading provider of equipment and services used in the drilling, evaluation, completion, production and intervention of oil and natural gas wells to independent oil and natural gas producing companies worldwide. Copia added a new $4 million position in Q4. Other leading institutions with large bullish bets on OXY in Q4 included legendary billionaire investor Ken Griffin's Chicago-based hedge fund Citadel adding 7.8 million shares to its 5.3 million share prior quarter position, and Balyasny Asset Management adding 2.0 million shares to its 4.5 million share prior quarter position. WFT reported its Q1 today, missing analyst revenue and earnings estimates, and guiding Q2 EPS down; its shares trade at 8 forward P/E and 1.1 P/B compared to averages of 11.7 and 2.4 for its peers in the oil field machinery and equipment group.
The following are additional companies that Copia is bullish about, accumulating shares in them in Q4 (see Table):
- Cheniere Energy Inc. (LNG), an operator of LNG receiving terminals and natural gas pipelines in the Gulf Coast of the U.S., including the Sabine Pass LNG terminal, in which it added a new $10 million position in Q4; and
- Hercules Offshore Inc. (HERO), that provides shallow-water drilling and marine services to the oil & natural gas exploration and production industry worldwide, in which it added a new $4 million position in Q4.
The following are Copia's high conviction bearish picks, based on its Q4 selling activity (see Table):
- Schlumberger Ltd. (SLB), a provider of technology services, project management and information solutions to the petroleum industry worldwide, in which it cut out completely in Q4 its $13 million prior quarter position;
- Marathon Petroleum (MPC), engaged in the refining, transporting and marketing of petroleum products, and operating six refineries in the Gulf Coast and Midwest regions that refine crude oil and other feed-stocks, and distributing the refined products through barges, terminals and trucks, in which it cut $12 million in Q4 from its $14 million prior quarter position;
- Continental Resources Inc. (CLR), an independent oil & natural gas exploration & production company with operations in the north, south, and east regions of the U.S., in which it cut out completely in Q4 its $11 million prior quarter position;
- Noble Corp. (NE), a Swiss company engaged in offshore contract drilling services for the oil and gas industry worldwide, in which it cut out completely in Q4 its $7 million prior quarter position;
- Baker Hughes Inc. (BHI), that provides wellbore products and technology services and systems for drilling, formation evaluation, completion and production, and reservoir technology and consulting to the global oil and natural gas industry, in which it cut out completely in Q4 its $6 million prior quarter position;
- Noble Energy Inc (NBL), a leading independent energy company, engaged in the acquisition, exploration, development, production, and marketing of crude oil, natural gas, and natural gas liquids in the U.S., and internationally in Argentina, China, Ecuador, Equatorial Guinea, the Mediterranean Sea, the North Sea and Vietnam,, in which it cut $5 million in Q4 from its $8 million prior quarter position; and
- Valero Energy Corp. (VLO), an independent petroleum refining and marketing company operating through three segments: refining, retail and ethanol, in which it cut out completely in Q4 its $4 million prior quarter position.
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.