Andreas Halvorsen’s Biggest Energy and Utilities Purchases of Q2

Following a dismal 8.2% loss posted by its flagship fund Viking Global Equities in the first quarter, Connecticut-based prominent hedge fund Viking Global made a number of changes to its US equity portfolio during the April-June period, its latest 13F filing reveals. Since its inception in 1999, Viking Global and its founder billionaire Andreas Halvorsen have made a name for themselves by delivering superior risk-adjusted returns on a consistent basis. However, like most other large hedge funds, the performance of Viking has also taken a hit in the last few quarters.

According to the fund’s latest 13F filing, its long US equity portfolio at the end of June was worth $23.54 billion, with around 30% of it invested in tech stocks. Though stocks from the utilities and energy sector accounted for only 4.7% and 15% respectively of Viking Global’s equity portfolio value at the end of June, those were the sectors in which the fund made some of its biggest purchases during the second quarter. Taking that into account, in this post, we will take a look at the five major purchases made by Viking Global in these two sectors and will try to figure out why the fund has become bullish on the stocks in question.

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#5 Dynegy Inc. (NYSE:DYN)

– Shares Owned by Viking Global (as of June 30): 9.13 Million

– Value of Holding (as of June 30): 157.49 Million

Let’s start with Dynegy Inc. (NYSE:DYN) in which Viking Global increased its stake by a whopping 2297% during the second quarter. Dynegy Inc. (NYSE:DYN)’s stock appreciated by over 200% in the period between late-February and early-June. However, it has given up a large chunk of those gains in the past three months and is currently trading up only 2% year-to-date. On August 3, the company reported its second-quarter earnings, declaring a per share loss of $6.73, which was more than ten times the per share loss of $0.64 that analysts had expected. The revenue of $904 million that Dynegy reported for that period was also $126 million less than analysts’ consensus estimate. Despite such weak numbers, most analysts who cover the stock continue to remain bullish on it including analysts at Deutsche Bank AG, who reiterated their ‘Buy’ rating and $35 price on August 25. During the second quarter, the number of funds covered by Insider Monkey long Dynegy increased by two to 43 and the aggregate value of their holdings in the company increased by $313 million to over $1 billion. Among them, Clint Carlson‘s Carlson Capital reduced its stake in the company by 34% to 5.48 million shares.

#4 Rice Energy Inc (NYSE:RICE)

– Shares Owned by Viking Global (as of June 30): 12.61 Million

– Value of Holding (as of June 30): $278 Million

Rice Energy Inc (NYSE:RICE) was a new entrant in Viking Global’s equity portfolio in the second quarter. Fuelled by the rally in energy prices, Rice Energy Inc (NYSE:RICE)’s stock has had a stellar rally so far in 2016 and currently trades up by 161.43% year-to-date. However, it is still down by more than 20% from the highs it was trading at in June 2014. Several analyst who track the stock believe that despite the humongous rally it has seen this year, it still remains undervalued when compared to peers, especially when one takes into account that the company has been increasing its production while reducing its costs. On August 29, analysts at Williams Capital initiated their coverage on the stock with a ‘Hold’ rating and a $29 price target, which represents a potential upside of 9% from the stock’s last trading price. Though the ownership of Rice Energy among hedge funds covered by us increased by only three to 38 during the second quarter, the aggregate value of their holdings in the company during the same time saw a jump of over 82%. Apart from Viking Global, other hedge funds that initiated a stake in the company during the second quarter include Ben Gambill‘s Tiger Eye Capital and Jesse Ro’s Tiger Legatus Capital.

#3 Calpine Corporation (NYSE:CPN)

– Shares Owned by Viking Global (as of June 30): 20.36 Million

– Value of Holding (as of June 30): $300.4 Million

Calpine Corporation (NYSE:CPN) is the only stock covered in this article in which Viking Global didn’t increase its stake by more than 100% during the second quarter, although by boosting its holding in the company by 98% the fund did come very close to doing that. Another billionaire who was bullish on Calpine Corporation going into the third quarter was David Einhorn, whose hedge fund Greenlight Capital initiated a stake in the company during that period by purchasing 5.66 million shares.  The Texas-based utility company lost a considerable amount of its market capitalization last year and its stock has again taken a large beating in August due to which it is currently trading down almost 11% for 2016. The decline that the stock has seen this month can be blamed largely on the dismal second quarter numbers that the company released at the end of last month. While analysts had expected Calpine Corporation (NYSE:CPN) to declare a per share loss of $0.02 on revenue of $1.29 billion for that period, the company reported a loss of $0.08 per share  on revenue of $1.16 billion. During the April-June period, the number of funds covered by us long Calpine Corporation declined by four to 32. However, the aggregate value of hedge funds’ holdings in the company during the same time saw an increase of $123 million.

#2 Anadarko Petroleum Corporation (NYSE:APC)

– Shares Owned by Viking Global (as of June 30): 7.8 Million

– Value of Holding (as of June 30): $415.51 Million

Moving on, Anadarko Petroleum Corporation (NYSE:APC) jumped several spots in Viking Global’s equity portfolio during the second quarter and became the fund’s 19th largest holding at the end of June owing largely to the over eight-fold increase that Viking made to its stake in the company during that time. Unlike the stock of several of its smaller peers, Anadarko Petroleum Corporation (NYSE:APC)’s stock hasn’t registered stellar gains this year. However, with year-to-date gain of 16.12% it has still performed better than the stocks of larger rivals like Exxon Mobil Corporation (NYSE:XOM), which has appreciated by only 12% so far in 2016. The company has sold several of its assets this year to improve its liquidity profile and lower its debt, but some analysts still feel that it needs to do a lot more going forward if it has to stay away from declaring bankruptcy. Anadarko Petroleum Corporation currently pays a quarterly dividend of $0.05 per share, which based on its last trading price translates into a minuscule annual dividend yield of only 0.36%. The ownership of Anadarko Petroleum Corporation among funds covered by Insider Monkey declined by over 20% to 48 funds during the second quarter, even though the aggregate value of hedge funds’ holdings in the company during that time rose by $304 million. Legendary oil speculator T Boone Pickens‘ BP Capital was one of the hedge funds that increased its holding in the company during the second quarter, by 24% to 169,132 shares.

#1 T-Mobile US Inc (NASDAQ:TMUS)

– Shares Owned by Viking Global (as of June 30): 13.96 Million

– Value of Holding (as of June 30): $604.33 Million

Having initiated its stake in T-Mobile US Inc (NASDAQ:TMUS) during the first quarter of the year, Viking Global proceeded to boost it by 424% during the second quarter. ThoughT-Mobile US Inc (NASDAQ:TMUS)’s stock hasn’t registered a gain anywhere close to the gain that arch rival Sprint Corp (NYSE:S)’s stock has seen this year, by appreciating 17.49% so far in 2016, it has still done reasonably well. Both these companies recently started a fresh fight when they launched similar unlimited-data plans for their networks within minutes of each other, on August 18. Following the launch of its plan, T-Mobile US received a lot of flak from users as the plan offered only 2G speeds while tethering and allowed video streaming at only 480p. However, the company was quick in addressing those issues and on August 29, announced changes to its T-Mobile One plans with T-Mobile One Plus. While time will only tell which of these two companies wins the unlimited data plan race, most analysts think that based on the way T-Mobile US has executed its strategies in the past, it has better chances of emerging as the winner. On August 29, analysts at Wells Fargo & Co. upgraded T-Mobile US Inc’s stock to ‘Outperform’ from ‘Market Perform’ while keeping their price target on it unchanged at $54. The ownership of the company among funds covered by us remained unchanged at 52 during the second quarter, however, the aggregate value of their holdings in it jumped by 28.44% during that time. Guru Ramakrishnan‘s Meru Capital initiated a stake in T-Mobile US Inc during the second quarter by purchasing 383,868 shares.

Disclosure: None