Millennium Management fund is a global hedge fund with assets of around $18.17 billion under management as of May 31, 2013. It has generated an average return of 16% per year over the last 22 years. The firm has a Sharpe ratio of 2.5, which is the highest among other hedge funds. The Sharpe ratio measures a fund’s efficiency to manage its portfolio by generating excess return per unit of risk from its trading strategies. As per its last 13F filings with the SEC, the funds top holdings as on March 31, 2013 were:
| Company | Percentage Holding |
|---|---|
| American Electric Power Company Inc (NYSE:AEP) | 0.63% |
| EOG Resources Inc (NYSE:EOG) | 0.58% |
| NRG Energy Inc (NYSE:NRG) | 0.51% |
These companies are striving for long-term growth by deploying various strategies. Let’s find out how their strategies are going to benefit investors.
Advancing in renewable energy by signing long-term PPAs
Extension of the Production Tax Credit in January for the next three years has helped American Electric Power Company Inc (NYSE:AEP) expand its power generation capacity from wind energy. This factor favors the company for signing long-term power purchase agreements, or PPAs, in the U.S., resulting in strong growth opportunities.
American Electric Power Company Inc (NYSE:AEP) plans to enhance its wind power portfolio to meet the increasing demand of renewable energy in Indiana, Michigan, and Oklahoma by signing a new PPA. Recently, the company, with its wholly owned subsidiary, Indiana Michigan Power, or I&M, signed a 20-year PPA with EDP Renewables. Under this agreement, EDP will purchase renewable energy of 200 megawatt, or MW, from I&M’s Headwaters wind farm. This wind farm will be installed and be fully operational by the end of next year. Headwaters will add 450 MW capacity to I&M’s total wind power portfolio. This project will help American Electric Power Company Inc (NYSE:AEP) to supply power to both Michigan and Indiana customers.
Additionally, the company’s Oklahoma unit currently serves 540,000 customers with its power generating capacity of 4,200 MW. It recently issued a request for proposal seeking 200 MW of long-term purchase deals of wind energy resources. It expects that this project will generate and supply power by Jan. 1, 2016, subject to Oklahoma utility regulators’ approval. It will replace the earlier PPA, which will expire by the end of 2015.
With these new deals, the company expects to generate revenue of $15.2 billion this year, $15.6 billion next year, and approximately $16 billion in 2015, from $14.9 billion in 2012, with a gross operating margin of around 58%.
Expansion to drive growth
EOG Resources Inc (NYSE:EOG) plans to increase capital expenditure from $7 billion to $7.2 billion, which will help enhance its drilling and production efficiencies. This will be mainly allocated to its operations in the Eagle Ford and Bakken region.
It is one of the largest oil producers in the Eagle Ford with a net acreage of 639,000 acres. The company estimated that it has 26.4 billion barrels of oil reserve under its development area in the Eagle Ford region, with more than 4,900 untapped drilling locations. It plans to increase the drilling program of 400 wells to 425 wells in 2013, and expects to ramp up production in 2014. The company expects its production in this region to grow 28% year-over-year in 2013.
EOG Resources Inc (NYSE:EOG) has the second-largest oil accumulation in the Bakken region and Three Forks formations in North Dakota. It is generating strong results from the 160 acre downspacing program in Parshal, the Three Forks reservoir. Its two recent 160 acre downspace wells in Parshal are producing oil at the rate of 2,375 bpd and 2,170 bpd. In these wells, the company has working interest, or WI, of 55%.
