T Boone Pickens Raises Exposure to His Favorite Stocks

Given his multiple decades in the energy industry, first as an oilman and then as a fund manager, T Boone Pickens of BP Capital is widely followed by investors and analysts alike.

Although Pickens sold out of his oil positions near the price bottom in February (saying at the time that he was waiting for the most opportune moment to get back in), Pickens has since re-upped his exposure to several names in energy and his fund has done well because of it. According to our methodology, BP Capital’s 52 positions in companies worth over $1.0 billion, returned 16.2% in the second quarter and are up by 20.1% year-to-date. In this article, we take a closer look at five stocks T Boone Pickens increased exposure to in the second quarter, WPX Energy Inc (NYSE:WPX), Superior Energy Services, Inc. (NYSE:SPN), Kinder Morgan Inc (NYSE:KMI), Cheniere Energy, Inc. (NYSEMKT:LNG), and Sunoco LP (NYSE:SUN).

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

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#5 Sunoco LP (NYSE:SUN)

– Shares held (as of June 30): 330,852
– Total Value (as of June 30): $9.91 million
– Percent of Portfolio (as of June 30): 3.93%

Pickens raised its position in Sunoco LP (NYSE:SUN) by 178% or 211,923 shares, in the second quarter to 330,852 shares,  the position amassing 3.93% of the fund’s equity portfolio. Although new oil sand projects are not as cost-competitive as shale or conventional oil projects, Sunoco has one of the lowest cost of production for existing oil sand projects. If Russia and Saudi Arabia, who recently agreed to work together in the oil market, can shore up sentiment around the commodity and send Brent prices higher, Sunoco’s dividend might be safer. At current Brent prices, many investors doubt the stock’s dividend safety. Of the around 750 funds we track, 12 had a bullish position in Sunoco LP (NYSE:SUN) at the end of June.

#4 Cheniere Energy, Inc. (NYSEMKT:LNG)

– Shares held (as of June 30): 270,108
– Total Value (as of June 30): $10.14 million
– Percent of Portfolio (as of June 30): 4.02%

Pickens more than tripled his position in Cheniere Energy, Inc. (NYSEMKT:LNG) to 270,108 shares at the end of June from 83,292 shares reported as of the end of March. Although the LNG market is oversupplied both presently and over the next few years, the long term prospects on the energy form are still promising. As the crude crash from 2014 showed, a lot can also change in a couple years. If crude prices rebound, demand for LNG will likely increase and Cheniere’s prospects will improve. Activist Carl Icahn’s Icahn Capital LP, who owned over 32 million shares at the end of the second quarter, could also potentially play a part in unlocking value in the stock. 

#3 Kinder Morgan Inc (NYSE:KMI)

– Shares held (as of June 30): 587,890
– Total Value (as of June 30): $11.01 million
– Percent of Portfolio (as of June 30): 4.36%

BP Capital raised its stake in Kinder Morgan Inc (NYSE:KMI) by 250,256 shares (74%) in the second quarter, giving it a June-end holding of 587,890 shares. After having cut its dividend sharply due to the increasing difficulty in raising growth capital from the capital markets last year, Kinder Morgan has made a comeback. Shares of the company are almost double what they were in late January, as growth capital is now more affordable and the fundamentals in the energy sector have bottomed. Warren Buffett‘s Berkshire Hathaway owned 26.5 million shares of Kinder Morgan at the end of the second quarter.

#2 Superior Energy Services, Inc. (NYSE:SPN)

– Shares held (as of June 30): 635,104
– Total Value (as of June 30): $11.69 million
– Percent of Portfolio (as of June 30): 4.63%

Pickens inched up his holdings in Superior Energy Services, Inc. (NYSE:SPN) by 16% from the end of March to the end of June, to 635,104 shares. Those shares were worth $11.69 million at the end of the second quarter and represented 4.63% of Pickens’ equity portfolio. As a collective, the smart money also raised its holdings. According to our data, 27 funds owned $271.02 million worth of Superior Energy Services, Inc. (NYSE:SPN)’s stock, which accounted for 9.70% of the float on June 30, versus 26 funds and $239.16 million, respectively, a quarter earlier. Analysts at Imperial like management’s cost cuts, the company’s healthy balance sheet, and Superior’s exposure to the onshore E&P service sector. 

#1 WPX Energy Inc (NYSE:WPX)

– Shares held (as of June 30): 1.31 million
– Total Value (as of June 30): $12.19 million
– Percent of Portfolio (as of June 30): 4.83%

With a holding of 1.31 million shares at the end of June, up by 180,596 shares from the end of the first quarter, WPX Energy Inc (NYSE:WPX) is T Boone Pickens’ top energy pick. Given that it is Pickens’ top pick, it isn’t surprising that WPX has also done very well, more than tripling from its February lows and gaining more than 124% year-to-date. WPX shares have surged due to stronger crude prices and a recent craze for all things Permian (unconventional production costs in the basin are very competitive). If crude prices continue rising, WPX will eventually turn profitable in the coming quarters. Other smart money funds also agree with Pickens on the stock, as the number of funds from our database with holdings in WPX Energy Inc (NYSE:WPX) rose by 10 quarter-over-quarter to 40 at the end of June.

Disclosure: none