When I recently approached the pile of 13F filings on my desk, I was very curious to see which of the “smart money” super-investors I follow were going to be making big bets on oil stocks.
Oil prices traded between the low $40s and low $60s in the second quarter, and the Energy SPDR (XLE) traded in a range of low $80s to mid-$70s in the quarter. Both are down substantially from last year’s second-quarter price ranges, so I was curious to see if anyone one was stepping up to the plate.
Daniel Loeb (Third Point)
Daniel Loeb has been very successful over the past 20 years with returns of about 20% annually since he opened his fund, according to his recent shareholder letter. Ordinarily the price collapse like we have seen in energy would have the value and occasionally activist investor diving in, but we really didn’t see that happening in the quarter.
Loeb did put a small toe into energy stocks, buying some select names, but they were relatively small purchases:
- Devon Energy (DVN) was his largest energy-related buy, as he opened a new stake of 3.75 million shares in the independent energy company.
- The fund also added 1.5 million shares of pipeline company Williams Companies (WMB).
- Third Point also increased his Clayton Williams Energy (CWEI) position by 25% to 1 million shares in the second quarter.
Energy is just 6% of the fund, so valuations apparently aren’t low enough to attract Third Point to the sector just yet.
Stanley Druckenmiller
As recently as April, Stanley Druckenmiller was bullish on oil, but that bullishness did not translate to buying energy related stocks in the second quarter of the year.
- While he did buy 1.5 million shares of Halliburton (HAL) during the quarter, Mr. Druckenmiller actually reduced his overall energy exposure from 20% at the end of March to just over 8% by the end of June.
- He was a net seller of EOG Resources (EOG), Cheniere Energy (LNG), Pioneer Natural Resources (PXD) and Noble Energy (NE).
Druckenmiller has been one of the best traders and investors of all time so his selling of the energy stocks is significant in my opinion.
Seth Klarman (Baupost Fund)
Seth Klarman’s Baupost Fund was a buyer of energy stocks in the second quarter. Almost 40% of Baupost is invested in energy relates securities, and it continues to buy.
- Baupost added new stakes in Sanchez Energy (SN), according to its June 13F filing.
- The fund also added to their stake in PXD, LNG and PBF Energy (PBF) during the three-month period.
Klarman has also had an enormous amount of success as a long-term investor, but he operates across a different time frame than the shorter-term Druckenmiller, so it is interesting to see that he is buying what an equally successful, more trading-oriented investor is selling.
Bottom Line
When I reversed my search and focused on individual stocks, there were very few energy stocks seeing widespread buying among the smart money. The most widely bought company was Chevron (CVX), with David Dreman, Mario Gabelli, Charles Brandes and Ruane, Cunniff among the buyers of the stock. Baker Hughes (BHI) also attracted some institutional interest from smart-money buyers, including Michael Price, Joel Greenblatt, Leon Cooperman and Dreman.
The smart-money crowd was not all that impressed by oil and gas stocks in the second quarter. So far in the third quarter, I have not seen any significant 13D activity that would indicate they have taken a different approach amid further oil price declines.
In other words, it still might be too early to be a widespread buyer of most energy stocks.
As of this writing, Tim Melvin did not hold a position in any of the aforementioned securities.
