Top Undervalued, High-Dividend Integrated Oil & Gas Picks By Legendary Fund Managers

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 |  Includes: BP, COP, CVX, EC, HES, MRO, PBR, PTR, RDS.A, SNP, SU, TOT, XOM, YPF
by: GuruFundPicks

In this article, via an analysis based on the latest available institutional 13-F filings, we identify the integrated oil and gas companies that legendary or guru fund managers favor the most based on their buying, and also the number of gurus that have a position and/or bought the stock during the quarter. In an earlier article, we looked at the picks of the world's largest money managers or mega funds in the integrated oil and gas group.

The legendary or guru fund managers included, such as Warren Buffett, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, are well-known for their savvy in picking winning stocks year after year. Taken together, these guru fund managers are bearish on the integrated oil and gas group, cutting a net $520 million in Q4 from their $7.99 billion prior quarter holdings in the group.

The following are the integrated oil and gas companies that these guru fund managers are most bullish about, that also trade undervalued relative to their peers in the group, and have high dividend yields (see table):

Ecopetrol SA (NYSE:EC): EC is a Colombia-based integrated oil & gas company operating in Colombia, Peru, Brazil and the U.S. Gulf Coast, and engaged in the exploration, production, refining and transportation of oil and gas. A total of three guru funds hold less than 0.1% of the outstanding shares, with three funds buying and none selling during the quarter. Also, together guru funds added a net $14 million in Q4 to their $30 million prior quarter position in the company. The top buyers were Driehaus Capital Management ($7 million) and billionaire and investment legend Ken Fisher's Fisher Asset Management ($6 million), and the top holders were Fisher Asset ($28 million) and Driehaus ($15 million).

It should be noted that Fisher has subsequently filed its 13-F for March last month (their most significant moves in Q1 2012 can be accessed by clicking on the above hyperlink), and they further increased their position in Ecopetrol, adding another 0.23 million shares in Q1 2012 to their 0.43 million shares prior quarter position. Also, for those familiar with our series on legendary and guru funds, and the world's largest money managers or mega funds, we also noted in an earlier article that mega fund managers too were bullish on Ecopetrol, based on their Q4 2011 trading activity.

Ecopetrol just reported its Q1 (March) on Tuesday, with revenues up 31% year-over-year and earnings also up 46% year-over-year to $10.0 billion and $1.18 respectively (no analyst estimates were available). Its shares have been star performers this year, up over 40% YTD compared to the flattish performance of the average energy stock during the same period. The shares currently trade at a 12 forward P/E compared to the average of 18.8 for international integrated oil and gas companies, and they have a high dividend yield of 6.2%.

YPF S.A. (NYSE:YPF): YPF Sociedad Anonima is a Buenos Aires, Argentina-based international energy company, engaged in the exploration, development, and production of crude oil, natural gas, and liquefied petroleum gas (LPG) in Argentina. A total of four guru funds hold 2.9% of the outstanding shares, with three funds buying and none selling during the quarter. Also, together guru funds added a net $17 million in Q4 to their $149 million prior quarter position in the company. The top buyers were guru Daniel Loeb's event-driven hedge fund Third Point LLC ($7 million), billionaire star fund manager Stephen Cohen's hedge fund SAC Capital Advisors ($5 million), and billionaire guru fund manager George Soros's Soros Fund Management ($5 million), and the top holder was Eric Mindich's multi-strategy hedge fund Eton Park Capital ($142 million).

YPF shares have been in a downward spiral this year, down almost 60% YTD. The huge drop was based on fears that the Argentine government would try to take over the company, a fear that came to bear Friday morning as news came out that the Argentine Parliament voted 207-32 in favor of expropriating 51% of the shares, and thereby taking controlling interest in YPF for a yet undetermined compensation. Its parent Repsol YPF S.A. is looking for $10.5 billion for its stake in the company. The bill is now headed to the desk of President Cristina Fernandez de Kirchner to be signed into law. YPF shares currently trade at a heavy discount at 3-4 forward P/E and 1.3 P/B compared to averages of 7.4 and 1.3 for its peers in the international integrated oil and gas group. Also, based on current prices, YPF has a very high dividend yield of 22.3%.

The following are some additional integrated oil and gas companies that guru fund managers accumulated in Q4 (see table):

  • Marathon Oil Corp. (NYSE:MRO), that is a U.S. integrated oil and gas company engaged in worldwide exploration, production, refining, transportation and marketing of crude oil and natural gas, in which guru funds together added a net $5 million in Q4 to their $94 million prior quarter position in the company;
  • Integrated oil and gas company Chevron Corp. (NYSE:CVX), in which guru funds together added a net $38 million in Q4 to their $345 million prior quarter position in the company;
  • Royal Dutch Shell Plc (NYSE:RDS.A), that is a leading Netherlands-based international integrated oil and gas company that is engaged in all phases of the petroleum industry from exploration to final processing and delivery, in which guru funds together added a net $10 million in Q4 to their $278 million prior quarter position in the company;
  • Petroleo Brasileiro SA (NYSE:PBR), a Brazilian company engaged in the exploration, production, supply and distribution of oil and gas in Brazil and abroad, in which guru funds together added a net $9 million in Q4 to their $26 million prior quarter position in the company;
  • Chinese integrated oil and gas company Petrochina Co. Ltd. Adr (NYSE:PTR), in which guru funds together added a net $5 million in Q4 to their $4 million prior quarter position in the company; and
  • Chinese integrated oil and gas company China Petroleum & Chemical Corp. (NYSE:SNP), in which guru funds together added a net $3 million in Q4 to their $14 million prior quarter position in the company.

Besides these, guru fund managers based on their Q4 trading activity indicated that they are bearish on the following integrated oil & gas companies:

  • Exxon Mobil Corp. (NYSE:XOM), a world leader in energy exploration and production, in which guru funds together cut a net $270 million in Q4 from their $2.08 billion prior quarter position;
  • Suncor Energy Inc. (NYSE:SU), that is an integrated energy company, engaged in the development of petroleum resource basins in Canada's Athabasca oil sands, in which guru funds together cut a net $159 million in Q4 from their $303 million prior quarter position;
  • BP Plc (NYSE:BP), that is a Britain-based leading international integrated oil and gas company engaged in the exploration, production, refining, marketing and transportation of oil and gas globally, in which guru funds together cut a net $98 million in Q4 from their $1.40 billion prior quarter position;
  • Integrated oil & gas company Hess Corp. (NYSE:HES), in which guru funds together cut a net $44 million in Q4 from their $190 million prior quarter position;
  • Integrated oil and gas company ConocoPhillips (NYSE:COP), in which guru funds together cut a net $22 million in Q4 from their $2.48 billion prior quarter position; and
  • Total SA (NYSE:TOT), that is a Paris-based Total is an international integrated oil and gas company that operates through three segments, namely upstream, downstream and chemicals, in which guru funds together cut a net $22 million in Q4 from their $210 million prior quarter position.

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Credit: Fundamental data in this article were based on SEC filings, 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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