BP Capital's Stock Picks Not for Everyone

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Includes: AONEQ, APA, APC, BHGE, BP, CHK, CVX, CWEI, DVN, DYN, ECA, EOG, FLR, GST, HAL, HES, KWK, MEE, NOV, PXP, QEP, SLB, SU, SWN
by: Efsinvestment

BP Capital, founded by T. Boone Pickens, is a relatively small hedge fund that specializes in mainly energy stocks. Energy investments amount to 92% of BP Capital's portfolio.

Pickens has a vast amount of business experience in the energy sector. Before founding Mesa Petroleum in 1956, he worked for Phillips Petroleum for several years. Pickens was the king of takeovers and acquisitions during the 1980s. After taking over the Hugoton production company, he led the acquisitions of Pioneer Petroleum and of Tenneco's mid-continent assets.

In 2008, the billionaire hedge fund manager introduced the "Pickens Plan," hoping to reduce America's dependency on the OPEC cartel. A radical suggestion in the plan was to introduce a wind-power corridor from Texas to Canada. So far, the plan has not received much attention from the administration.

While Pickens has significant private investments in alternative energy, BP Capital is still bullish about oil. According to the latest filings of BP Capital submitted to I-Metrix Edgar-Online, Pickens increased his positions in the following stocks:

Bullish Stock Picks

Company Name

Ticker

$ Value

% Change

YTD Return

Profit

A123 SYS INC

AONE

3.64

New

-29.04%

-1.06

BP PLC

BP

23.54

6.23

2.31%

0.54

CHESAPEAKE ENERGY

CHK

29.20

18.83

28.79%

8.41

DYNEGY INC DEL

DYN

8.02

New

3.91%

0.31

EOG RES INC

EOG

21.35

New

31.13%

6.65

GASTAR EXPL LTD

GST

5.46

New

11.86%

0.65

HALLIBURTON CO

HAL

12.90

3.46

20.25%

2.61

NATIONAL OILWELL

NOV

13.56

New

22.48%

3.05

PLAINS EXPL& PRODTN

PXP

21.30

90.48

11.05%

2.35

QEP RES INC

QEP

19.03

179.71

10.72%

2.04

Total/Average

158.02

11.35%

25.56

Value Weighted Average

16.17%

Pickens' worst new stock pick was A123 Systems. AONE is a different company that does not fit much into BP Capital's portfolio. AONE designs, develops, manufactures, and sells batteries. The company is hoping to become a reliable supplier of lithium-ion batteries for the new generation electric vehicles. So far, it hasn't been a good investment, but it could be an outperformer in the long term.

The best performer on the list is EOG, an energy company with a diversified portfolio of gas and oil businesses. Share prices soared since January, boosting BP Capital's portfolio by 31.13%. If Pickens did not purchase EOG stocks in the last quarter, his portfolio performance would have been much lower -- around 12%.

There are 14 stocks that BP Capital does not like much:

Bearish Stock Picks

Company Name

Ticker

$ Change

%

Change

YTD

Return

Lost

Profit

APACHE CORP

APA

-20.74

Sold

7.43%

1.54

ANADARKO PETE CORP

APC

-17.81

Sold

9.32%

1.66

BAKER HUGHES INC

BHI

-8.45

Sold

30.01%

2.54

CHEVRON CORP NEW

CVX

-10.30

Sold

18.55%

1.91

WILLIAMS CLAYTON

CWEI

-6.33

-52.04

21.44%

1.36

DEVON ENERGY

DVN

-4.28

-23.97

17.02%

0.73

ENCANA CORP

ECA

-10.27

Sold

18.15%

1.86

FLUOR CORP NEW

FLR

-7.39

Sold

10.01%

0.74

HESS CORP

HES

-10.80

Sold

9.05%

0.98

QUICKSILVER

KWK

-8.51

Sold

-3.87%

-0.33

MASSEY ENERGY

MEE

-4.50

Sold

27.00%

1.22

SCHLUMBERGER

SLB

-19.06

Sold

13.32%

2.54

SUNCOR ENERGY

SU

-9.26

-36.85

15.89%

1.47

SOUTHWESTERN ENERGY

SWN

-8.73

Sold

13.55%

1.18

Total/Average

146.43

14.78%

19.40

Value Weighted Average

13.25%

The ytd performance of the BP Capital's bearish stocks is interestingly high. While the value weighted average return is 13.25%, the simple average is 14.78%. A diversified portfolio, where one invests an equal amount of money in BP Capital's bearish stocks, would beat the S&P 500 return (4.78%) by an extremely significant margin. Baker Hughes, Massey Energy, and Williams Clayton have gained 30%, 27%, and 21.44%, respectively, since January.

The results indicate that while Pickens is in the right sector, he is not the right hedge fund to imitate. In fact, BP Capital's energy investments are only a fraction of John Paulson's $28 billion hedge fund. It would be wiser to follow Paulson's favorite stock picks when it comes to commodities. He is also extremely bullish on oil and other commodities.

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