One of the key principles of smart investing is diversification. The majority of funds that we track have largely-diversified equity portfolios with at least 10-15 positions and at most…well, this number can go to as high as hundreds or even thousands of companies. However, we are talking about great hedge funds with hundreds of millions in assets, which allows them to take some risks and even obtain smaller returns from large-cap stocks, which in exchange promise a smaller risk. For these reasons, mimicking the stock picks of big investors who managed to make billions worth of fortune from investing activity is not a particularly good strategy for small investors. For example, Greenlight Capital, which manages around $7.50 billion in equity posted returns of around 19% per year since its inception, which is definitely not good enough if your goal is to get rich and you only have at most $1.0 million to invest.
Nevertheless, following the activity of billionaires that we track can still provide a lot of useful insights. As we follow their stock picks disclosed in quarterly 13F filings, we compile the data and identify stocks that are the most popular among hedge funds that we follow, and in particular, popular among billionaires. In this article we will look into five energy stocks that are the most popular among billionaires, according to the latest round of 13F filings for the end of fourth quarter of 2014. The majority of these companies are engaged in Exploration and Production of Oil & Gas, like Anadarko Petroleum Corporation (NYSE:APC), but there are also integrated Oil & Gas Companies like Petrobras, or suppliers of equipment related to the Oil & Gas industry.
We are looking into the energy sector because it is a particularly important subject that has made headlines over the last couple of months. With oil prices falling by 44% over the last year, investors and analysts are wondering how this has affected energy companies and what does the future have in store for them. Drilling stocks fell by 45% over the last year, while E&P and Equipment companies lost 15% and 13% respectively. In this way some investors have considered that oil prices might rebound and they may be able to profit from the opportunity to get into energy stocks while they are cheap, while others have moved out of them in order to minimize short and medium-term risk and seek opportunities elsewhere.
In this way, Anadarko Petroleum Corporation (NYSE:APC) was the favorite energy stock among billionaires, with 11 funds holding long positions with a total value of around $1.63 billion. On the other hand, the overview of the whole data shows that among some 730 funds that we track, Anadarko, an exploration and production company, lost a significant amount of popularity, as the number of funds holding the stock fell to 87 from 110, while the aggregate value of their positions declined to some $5.61 billion, from $9.12 billion in the previous quarter. However, some billionaires have still been bullish on Anadarko Petroleum Corporation (NYSE:APC) during the last quarter of 2014. Ken Griffin of Citadel Advisors and Paul Singer of Elliott Management, have raised their stakes by 35% and 24% over the quarter, to 4.92 million shares and 4.62 million shares respectively. Anadarko Petroleum Corporation (NYSE:APC) is one of the few E&P stocks that managed to post positive returns over the last 52 weeks and even though it returned only around 4%, it was still significantly above the industry average.
On the second spot is Devon Energy Corp (NYSE:DVN), another E&P company, which inched up by 0.31% over the last year. A total of nine billionaires among the funds that we track have disclosed holding around $996.90 million worth of the company’s stock. Overall, the company was included in the equity portfolios of 58 of the funds that we track, down from 60 in the previous quarter. Again, Ken Griffin has been bullish on Devon Energy Corp (NYSE:DVN) during the fourth quarter and raised Citadel’s stake by 78% to 8.64 million shares, while billionaire Israel Englander of Millennium Management upped the holding by 50% to some 3.88 million shares.
Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) has also been one of the popular energy stocks among billionaires, with nine funds reporting ownership of $312.17 million of the company’s stock. Interestingly, many billionaires have boosted their positions in Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). Jim Simons’ Renaissance Technologies added around 9.28 million shares to bring its total to 9.86 million shares, and Israel Englander’s Millennium Management raised its stake by 1,500% to 4.34 million shares. On the other hand, George Soros sold out his position of some 766,700 shares, which was initiated in the previous quarter and halved the amount of call options he holds. Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) has been in the middle of a lot of uncertainty recently, including allegations of corruption, which together with falling oil prices led to the stock losing over 40% during the last year.
The decline in oil prices has also affected companies engaged in providing equipment and services for the oil & gas segment. Halliburton Company (NYSE:HAL), even though it lost 21% over the last 52 weeks, was the favorite oil & gas equipment and services company among billionaires, with eight billionaire-managed funds reporting holding the stock as of the end of 2014, including Ken Griffin, who cut his stake to 1.93 million shares, and Steven Cohen, who boosted his holding by 1,400% to 1.81 million shares. The last round of 13F filings showed a significant reduction in popularity for Halliburton Company (NYSE:HAL), with 63 funds reporting holding the stock, down from 72 in the previous quarter. However, the two largest shareholders among funds that we track: Jeffrey Ubben’s ValueAct Capital and Glenn Greenberg’s Brave Warrior Capital both initiated stakes in Halliburton Company (NYSE:HAL) during the October-December period and held 20.90 million shares and 4.14 million shares respectively, showing extreme bullishness on this stock.
And finally there is Exxon Mobil Corporation (NYSE:XOM) which only a couple of months ago was the second-largest company in terms of market cap, but as oil prices went down, that title was ceded to Microsoft Corporation. Nevertheless, at the end of 2014, Exxon Mobil Corporation (NYSE:XOM) was included in the equity portfolios of 62 funds, including 8 billionaires, down from 72 funds in the previous quarter. Billionaires Ken Griffin, Ken Fisher, and David Shaw have disclosed holding shares of Exxon in their latest 13F filings, although they trimmed their exposure to the company and raised the amount of Put options. Israel Englander, on the other hand, raised his stake by over 70% to 564,900 shares. However, in the equity portfolios of all billionaires, Exxon Mobil Corporation (NYSE:XOM) represents less than 1% of the total portfolio value. However, what’s more interesting is the fact that Warren Buffett sold out his entire position in Exxon Mobil, which contained 41.13 million shares previously and placed Berkshire Hathaway among the top shareholders of the company at the time.
Disclosure: None
