Anadarko Petroleum Corporation (APC), Cimarex Energy Co (XEC) & 2 More: Do Encompass Capital’s Top Energy Picks Have Any Juice Left In Them?

There were 659 hedge funds in our database whose 13F portfolios contained at least five long positions in billion-dollar companies as of on June 30. Of those 659 funds, an impressive 627 of them delivered positive returns during the third quarter, according to our calculations. All told, their long picks in billion-dollar companies averaged a gain of 8.3% for the quarter, well above the S&P 500 ETFs’ 3.3% figure.

Todd J. Kantor‘s Encompass Capital Advisors picks in energy stocks like Anadarko Petroleum Corporation (NYSE:APC), Newfield Exploration Co. (NYSE:NFX), Cimarex Energy Co (NYSE:XEC), and Chesapeake Energy Corporation (NYSE:CHK) helped it rank as one of those funds with positive stock returns for the quarter, and we’ll look at those stocks in this article. According to our measurements, the fund’s stock returns in the third quarter amounted to 16.69%, based on its long positions in 20 companies that were worth $1 billion or more on June 30. Although our calculations of the weighted average returns of a fund may differ from the fund’s actual returns because we don’t factor in positions in small-cap stocks and some other instruments, they can still be used as a guide for whether or not it’s worth imitating its investment moves. The fund’s main focus is investing in the energy sector. As of the end of June, the fund disclosed an equity portfolio worth $337.31 million, and 73% of that value was invested in energy stocks. Now then, let’s check out the aforementioned stocks and see how they performed for the fund in Q3.

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We are starting with Anadarko Petroleum Corporation (NYSE:APC), a company that was a new addition to the fund’s portfolio in the June quarter. A good addition, we may add, since the company returned 19.1% during the third quarter. Encompass Capital Advisors acquired 577,035 shares of the company during the second quarter, which were valued at $30.73 million, creating a position that amassed 9.11% of its portfolio’s value. 

APC was in 48 hedge funds’ portfolios at the end of the second quarter of 2016, whereas there were 59 hedge funds in our database with APC positions at the end of the previous quarter. Viking Global was the largest shareholder of Anadarko Petroleum Corporation (NYSE:APC) at the end of June, with a stake worth $415.5 million as of June 30. Trailing Viking Global was Adage Capital Management, which amassed a stake valued at $338.5 million. D E Shaw, Eagle Capital Management, and Stelliam Investment Management also held valuable positions in the company.

The second top energy pick of Encompass Capital Advisors for the third quarter was Newfield Exploration Co. (NYSE:NFX). The fund decided to lower its stake in the company during the second quarter by 52%, to 600,000 shares. The position accounted for 7.86% of the value ofthe hedge fund’s equity portfolio. In the three months ended September 30, the stock dipped by 1.6%, proving to be one of the rare misses for the fund in the quarter. Over the past 12 months, the company’s shares have lost 1.52%.

NFX was in 45 hedge funds’ portfolios at the end of the second quarter among those we track, down from 49 with NFX positions at the end of the first quarter. Among these funds, Brenham Capital Management held the most valuable stake in Newfield Exploration Co. (NYSE:NFX), which was worth $97.2 million at the end of the second quarter. On the second spot was Conatus Capital Management which amassed $89.6 million worth of shares. Moreover, AQR Capital Management, Ivory Capital (Investment Mgmt), and Alyeska Investment Group were also bullish on Newfield Exploration Co. (NYSE:NFX).

Cimarex Energy Co (NYSE:XEC) is another oil and gas exploration and production company that was added to Encompass Capital Advisors’ portfolio during the second quarter. The fund acquired 221,106 shares of the stock, creating a position that was valued at $26.38 million and accounted for 7.82% of its portfolio’s value on June 30. Cimarex gained 12.7% during the third quarter.

At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 22% rise from the previous quarter. More specifically, Diamond Hill Capital was the largest shareholder of Cimarex Energy Co (NYSE:XEC), with a stake worth $418.5 million reported as of the end of June. Trailing Diamond Hill Capital was Millennium Management, which amassed a stake valued at $141.2 million. Point72 Asset Management, Discovery Capital Management, and Citadel Investment Group also held valuable positions in the company.

Lastly is another new addition to Encompass Capital Advisors’ portfolio during the June quarter and one of its four top energy picks, Chesapeake Energy Corporation (NYSE:CHK). Considering that the company’s shares bestowed a return of 46.5% to their holders during the third quarter, the fund’s new position was certainly a smart move. That position was valued at $22.37 million on June 30 and consisted of 5.23 million shares.

At the end of the second quarter, 31 of the hedge funds in our system held long positions in the stock, same as in the previous quarter. More specifically, Icahn Capital was the largest shareholder of Chesapeake Energy Corporation (NYSE:CHK) on June 30, with a stake worth $312.7 million reported as of the end of June. Trailing Icahn Capital was Southeastern Asset Management, which amassed a stake valued at $109.6 million. Steadfast Capital Management, Blue Ridge Capital, and Arrowstreet Capital also held valuable positions in the company.

Disclosure: None