Andrew Hall’s Astenbeck Capital Management filed its quarterly holdings with the SEC on Friday, February 10. The total portfolio value is smaller than a lot of the hedge funds we track, with a value of $537.55 million, but it has a couple of good plays we think are worth mentioning.
Astenbeck Capital is a newer fund, but it knows a thing or two about the energy sector and commodities. It was founded just two years ago, in February 2010, by Andrew Hall, the fund’s manager and the CEO of international commodities trading firm Phibro LLC, and the Occidental Petroleum Corporation. The fund, which is owned 80% by Hall and 20% by Occidental, was founded with the idea of managing hedge funds for Phibro’s investors. Playing off the industries of its owners, Astenbeck Capital actually specializes in the energy sector and commodities.
Like many funds invested in this sector, Astenbeck Capital holds positions in some of the largest companies in the energy sector, like BP Plc (BP), ConocoPhillips (COP) and Exxon Mobil Corp (XOM), but its positions in those companies are relatively small compared to its other 40+ holdings. Instead, we see more inspiration in Astenbeck Capital’s largest positions.
As of the end of the fourth quarter, Astenbeck Capital’s largest position was a $63.72 million ADR of Statoil (STO). ADR stands for “American Depository Receipt” and it means that the shares were issued with the knowledge and cooperation of the company. Astenbeck’s position in Statoil is significant for two reasons. For one, it occupies a considerable percentage of the fund’s total assets under management, but the second reason is even more significant – at the end of the third quarter, Astenbeck’s position in Statoil was worth less than $4.13 million. That is quite an increase. The total number of shares went from 191,592 at the end of September to just under 2.49 million at the end of December.
When the markets opened on February 13, Statoil was trading at $27.42, or 9.63 times its forward earnings. Over the last 52 weeks, Statoil’s share price has increased by 13.06%, compared to an increase of 0.77% for the S&P 500. Analysts expect the share price will continue to rise. On January 17, Howard Weil upgraded its opinion of the company to outperform while others estimate the company’s earnings will grow by 7.65% per annum for the next five years. In comparison, BP Plc (BP), one of Statoil’s closest competitors, is priced lower relative to its future earnings, with a forward P/E of just 6.79, but has estimated earnings growth of just 3.85%. Statoil also pays a 94 cents dividend (3.50% yield). John Overdeck and David Siegel’s Two Sigma Advisors likes Statoil. We actually prefer BP over STO because of its 30% lower forward PE ratio. Statoil’s EPS growth estimate is only 4 percentage points more than BP’s EPS growth estimates and it doesn’t justify a huge premium.
Andrew Hill’s Astenbeck’s Capital is also bullish about Total SA (TOT). The fund had almost 1.11 million shares in the company at the end of the fourth quarter, or roughly $56.61 million. Hill did sell some of the fund’s stock in Total during the fourth quarter – the fund had had 1.12 million shares in Total at the end of September – but the total value of the stake increased, from just $48.95 million at the end of the third quarter. And, there is no reason to think that its growth will not continue.
When the markets opened on February 13, Total was trading at $54.37, on a one-year target estimate of $62.58. It also pays a $2.51 dividend (4.70%). Yet, in spite of the upside and the high dividend, Total is priced at just 7.74 times its forward earnings, so lower than Statoil’s but higher than BP’s. Analysts predict slow growth for the company, estimating an earnings growth of just 3.00% per annum over the next five years, which is much lower than Statoil’s or even BP’s, but we think the timing is perfect for a short-term, roughly one-year, position. Analysts estimate Total’s earnings will increase by 16.60% this year. Jim Simons’ Renaissance Technologies is also a fan of Total. TOT is a better bet than STO but again we prefer BP. BP’s dividend payments are more regular whereas Total’s dividend payments fluctuate from quarter to quarter.
Astenbeck Capital likes Schlumberger (SLB) as well. The fund held 489,397 shares in the company at the end of the fourth quarter, a value of over $33.43 million. This is larger than Astenbeck Capital’s holding in the company at the end of the third quarter, when the fund owned just 413,104 shares, valued at $24.68 million. Schlumberger was trading at $78.09 a share when the markets opened on February 13, on a one-year target estimate of $90.72 a share. The company also offers a $1.10 dividend (1.40% yield). Right now, it is priced at just 13.64 times its forward earnings, which may be higher than Statoil or Total but it is a bargain given analyst predictions about Schlumberger’s growth. They estimate the company’s earnings will grow by 24.65% per annum over the next five years, handily beating out industry expectations of 15.43%, or estimates of 10.70% for the S&P 500. However, for as high as its earnings growth estimates are, the company’s earnings are expected to grow by 28.40% this year (beating its estimates for the next years) then increase by only 21.70% next year. The numbers sound good but to our minds, Schlumberger competitor Halliburton (HAL) is a better pick. Halliburton has even greater earnings growth estimate than Schlumberger, at 26.54% and is priced lower at just 7.96 times its forward earnings. We think Halliburton is a good longer term play. Ken Fisher’s Fisher Asset Management likes Schlumberger, but it also owns a significant stake in Halliburton.
