by Aaron Levitt | August 16, 2013 9:42 am
Although the company rejected his proposal for a $4-per-share dividend back in May, billionaire activist investor Carl Icahn is back at the “well” with regards to offshore driller Transocean (RIG).
Icahn’s quarterly 13F filing showed that he increased his stake in RIG by about 1.3 million shares from the end of the previous quarter. Those extra purchases boosted his overall stake in the deepwater offshore driller to nearly 21.5 million shares, or 6% of the total.
That’s what makes 13Fs — the quarterly report that money managers with over $100 million in equity holdings must fill out — valuable to the rest of us: They provide a free glimpse into what the “smart money” names are buying and selling each quarter.
And last quarter, Carl Icahn wasn’t the only successful money manager name betting on the energy sector. Instead, a lot of other top hedge fund managers were buying into energy stocks as well.
Let’s take a look at some of the top picks.
Third Point (Dan Loeb)
While Dan Loeb recently made headlines with his long position in Herbalife (HLF), the hedge fund manager has been quite active in the energy sector as well, adding several positions with the latest 13F.
One of the biggest: Marathon Petroleum (MPC). Loeb added 1.25 million shares of the firm, as well as a huge call option position in the beaten down refiner.
Right now, shares of Marathon are about $20 below their 52-week highs as investors have abandoned the company in the face of declining margins. Crack spreads between West Texas Indeterminate and Brent crude oil have drifted lower over the last few months as infrastructure bottlenecks are finally being eased out of the system.
But there’s still reasons to be bullish on MPC. The main one: Marathon continues to improve its other fundamentals. On a year-over-year basis, Marathon’s total revenue rose 27% in the second quarter. Meanwhile, refined product sales volume increased by a juicy 35%. Much of that increase in sales volumes comes from the firm’s rising export business. Marathon has the highest export rate of the refiners, at around 190,000 a day.
With a P/E under 8, Loeb knows a deal when he sees one.
Paulson & Co. (John Paulson)
John Paulson’s made headlines over gold and pianos lately, but another big move by the manager centered around Cobalt International Energy (CIE). The hedge fund manager increased his stake in the E&P firm by a whopping 1,743% in the second quarter.
Cobalt has roughly 1.4 million gross undeveloped acres in the Gulf of Mexico, but its huge tracts of undeveloped acreage in Angola could the real ticket to stardom. Those 5.6 million gross acres have already turned in some pretty impressive results with initial test wells and production. Angola has estimated reserves of more than 12.66 billion barrels of crude oil.
With that in mind, Cobalt could be sitting on a virtual ocean of crude. And considering oil’s recent high $100-plus per barrel price tag, Paulson — along with investors that follow his lead — could be sitting on some nice future gains.
CIE currently isn’t profitable, but shares continue to make new highs on each discovery in West Africa.
Berkshire Hathaway (Warren Buffett)
When he’s not campaigning for higher taxes on the rich, Berkshire Hathaway’s (BRK.A, BRK.B) bespectacled billionaire Warren Buffett does a fair bit of investing. And the legendary value investor guided Berkshire’s $89 billion portfolio into a handful of new positions this past quarter.
Perhaps most interesting was his bet on Canadian heavy-oil producer Suncor (SU). According to Berk’s 13F, Buffett added more than half a billion dollars’ worth of the bitumen kingpin to the portfolio.
Suncor derives most of its current oil production from Alberta’s oil sands. That’s hurt the firm as Canadian crude oil has traded at even bigger discounts to Brent than WTI. As such, margins as well as earnings have suffered at Suncor over the last year or so.
But the firm is one of the largest land-holders in the Athabasca tar sands region, and production over the longer term should continue growing as energy-thirsty Asia looks towards Canada for its petroleum needs.
Plus, Suncor shares are cheap on both price-to-book value (1.2) and forward P/E (10.3) metrics.
Soros Fund Management (George Soros)
With so many holdings, it can be easy to get lost in George Soros’ portfolio. However, digging deep into the 13 F of the “man who broke the Bank of England,” we find some interesting energy sector buys … including his over 1.8 million new shares of Penn Virginia (PVA).
The stake is a small one for the $8 billion fund, but the small-cap stock could be a bigger winner long-term for Soros.
The E&P firm is already a natural gas player in the Marcellus shale, and has recently expanded heavily into the oil rich Eagle Ford via a series of acquisitions. Those buys have made PVA less tied to the fate of natural gas prices — which have kept shares in the doldrums — and more of a balanced energy producer. The company’s extremely successful $775 million debt refinancing didn’t hurt either.
Those two events could see PVA shareholders with big smiles on their faces as higher shale oil and liquids prices drive the firm’s bottom line higher. Ultimately, shares could double over the next few years as production begins to take off.
As of this writing, Aaron Levitt did not own a position in any of the aforementioned securities.
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