Andrew Hall is one of the most revered traders in the energy market today. While he was ultra-long crude during the bull part of the commodity cycle from the mid 2000’s to 2008, Hall shorted the commodity when crude prices fell back to earth in the Great Recession and made $100 million in bonuses in 2008 for his efforts. Hall later used some of his bonus money to found Astenbeck Capital Management, which had an equity portfolio in excess of $115 million as of September 30. Given Hall’s extraordinary resume, let’s take a closer look at Astenbeck Capital Management’s top picks, which include Pioneer Natural Resources (NYSE:PXD), EOG Resources Inc (NYSE:EOG), Cimarex Energy Co (NYSE:XEC), Concho Resources Inc (NYSE:CXO), and ConocoPhillips (NYSE:COP).
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by 52 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. 48.6% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
#5 ConocoPhillips (NYSE:COP)
Shares held (as of September 30): 218,936
Total Value (as of September 30): $10.5 million
Percentage of Portfolio (as of September 30): 9.07%
Astenbeck Capital Management slashed its position in ConocoPhillips (NYSE:COP) by 70% in the quarter, but still had a holding of 218,936 shares. Because of low crude prices and a lack of a meaningful downstream presence, ConocoPhillips shares have fallen by 22% year-to-date and now yield a 5.78% dividend, more than twice the ten-year Treasury’s payout. ConocoPhillips’ dividend is safe, as the company is cutting capex and costs. COP plans to reduce 2015 capex to $10.2 billion from the previous $11.5 billion and cut operating costs to $8.2 billion from $8.9 billion. Management also plans to divest non-core assets to shore up its cash flows.
#4 Concho Resources Inc (NYSE:CXO)
Shares held (as of September 30): 121,633
Total Value (as of September 30): $11.96 million
Percentage of Portfolio (as of September 30): 10.33%
Although Astenbeck reduced its position in Concho Resources Inc (NYSE:CXO) by 68% in the quarter, analysts are still bullish on the Permian Basin E&P. Two analysts have ‘Strong Buy’ ratings, sixteen more have ‘Buy’ ratings and only seven have ‘Hold’ ratings. None of the analysts have a ‘Sell’ rating. Many of the around 730 elite funds we track are bullish too, with 45 funds amassing 6.8% of its float at the end of September.
