Billionaire Israel Englander’s Energy Stock Picks Include Apache Corporation (APA)

We track quarterly 13F filings from hundreds of hedge funds and other notable investors, including billionaire Israel Englander’s hedge fund Millennium Management. While our principal use for the information in 13Fs is in developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year) we also like to go through the filings from top investors to see what they might be thinking about the markets. When we analyzed Millennium’s most recent filing we noticed that the fund had several energy stocks among its largest holdings. Read on for our quick take on Millennium’s five largest energy positions by market value as of the end of March or see the full list of stocks the fund reported owning.

Credit: Apache Corporation (NYSE:APA)

Englander’s second largest holding overall was his slightly more than 1 million shares of EOG Resources Inc (NYSE:EOG). The $36 billion market cap oil and gas company has been experiencing high growth, with revenue up 27% last quarter compared to the first quarter of 2012 and earnings rising by over 50%. While the current valuation does already include some future growth, Wall Street analysts are bullish and as a result the five-year PEG ratio is 0.9. Citadel Investment Group, managed by billionaire Ken Griffin, doubled its holdings of EOG Resources Inc (NYSE:EOG) to a total of 2.6 million shares at the end of March (check out Griffin’s stock picks).

Exploration and production company Gulfport Energy Corporation (NASDAQ:GPOR) was another of Millennium’s top five picks with the filing disclosing ownership of 2.5 million shares. While profits have been fairly low on a trailing basis, the stock price is up 180% in the last year due to Gulfport’s position in emerging oil and gas plays such as the Utica, Niobrara, and Bakken. Analyst consensus for 2014 implies a forward earnings multiple of 23, however, which may be a bit high compared to the company’s peers. Renaissance Technologies, whose founder Jim Simons is now a billionaire, was also buying Gulfport Energy Corporation (NASDAQ:GPOR) during Q1 (research more stocks Renaissance was buying).

Millennium was a heavy buyer of Apache Corporation (NYSE:APA) between January and March, with its stake in the company increasing to a total of 1.4 million shares. Revenue and earnings were each down 10% in Apache’s most recent quarter compared to the same period in the previous year. However, the sell-side expects the company to rebound strongly and as a result the forward P/E is 9- reflecting a large expected increase in earnings per share. D.E. Shaw, a large hedge fund managed by billionaire David Shaw, owned 1.2 million shares of Apache Corporation (NYSE:APA) according to its own 13F (find D.E. Shaw’s favorite stocks).

According to the 13F, Englander and his team had 2.2 million shares of Baker Hughes Incorporated (NYSE:BHI), a $20 billion market cap oilfield equipment and services company best known for its drill bits, in its portfolio. Analyst expectations are high here as well, as shown by the respective trailing and forward earnings multiples of 17 and 11. Results were not particularly good in the first quarter of 2013, with both revenue and earnings down versus a year earlier, but in theory Baker Hughes Incorporated (NYSE:BHI) would stand to benefit from a further ramping up of drilling activity.

The fund increased its stake in Marathon Petroleum Corp (NYSE:MPC) – an oil and gas refining and marketing company which was spun out from Marathon Oil Corporation (NYSE:MRO) in 2011- to over 1 million shares by the end of March. Both the trailing and forward earnings multiples are 8, as the market is generally assigning cheap valuations to downstream energy companies. We’d note that the stock price has more than doubled in the last year, over a period when business seems to have expanded nicely. Billionaire Andreas Halvorsen’s Viking Global bought 2.8 million shares of Marathon Petroleum Corp (NYSE:MPC) during Q1 (see Halvorsen’s stock picks).

Disclosure: I own no shares of any stocks mentioned in this article.