For us retail investors, it pays to heed the advice of some superstar money managers. After all, they didn’t get to be billionaires — and in some cases multi-billionaires — by making a lot of poor investment decisions. Finding underfollowed values and contrarian bets are the keys to their long-term success. Those are traits that all investors should strive to follow.
And the best way for retail investors to find out what the smart money is doing is by looking at their recent 13F filings.
The form is a quarterly report that money managers with more than $100 million in equity holdings must fill out with the Securities & Exchange Commission (SEC). It’s incredibly valuable to the rest of us, as it provides a free glimpse into what the “smart money” names are buying and selling each quarter.
And it seems that the smart money has a penchant for energy stocks. For the latest quarter, superstar money managers dove heavily into the oil & natural gas sector. But what exact energy stocks were they buying?
Let’s take a look at some of the pros’ top energy stocks picks:
Energy Stocks The Smart Money Is Buying Now — CVR Energy (CVI)
Icahn Enterprises (Carl Icahn)
A few years ago, Icahn saw an opportunity at the small refiner and pushed for management to either sell itself out to a larger downstream firm or explore other options. The resulting proxy battle had the fund manager essentially taking control of the firm. That change led to CVI spinning off some of it refining assets out into a lucrative master limited partnership (MLP) — dubbed CVR Refining, LP (CVRR).
However, Icahn may not be done with CVI just yet. According to his latest 13F, the fund manager increased his stake in the energy stock by 8%.
Perhaps, Icahn was lured by CVI stock’s recent price drop. Shares of the firm plunged with the rest of the energy sector as regulators decided to allow some exports of ultra-light oil called condensate. That drop pushed CVI’s dividend yield into the 6% range. The fall in prices has proved to be ,unwarranted and refiners — including CVI — have rallied back including CVI.
Retail investors still have the opportunity to follow Icahn into CVI and gain from improving crack spreads, better earnings and a very strong cash potion. Which may be what Icahn is truly after.
Energy Stocks The Smart Money Is Buying Now — Consol Energy (CNX)
Soros Fund Management (George Soros)
It can be easy to get lost in George Soros’ hedge fund portfolio. The manger currently holds 496 different stocks and exchange-traded funds (ETFs). However, digging deep into the 13 F of the multi-billionaire philanthropist, we find some interesting energy stocks … including the 5 million new shares of CONSOL (CNX).
CNX is best known as coal miner, and on that front, it has been suffering along with everyone else. However, things are looking better for the energy stock and Soros’ purchase. That’s because CONSOL is getting out of the coal game and focusing on more lucrative natural gas.
CNX has plowed heavily into fracking for natural gas in the Marcellus and other shale formations. Those efforts are really beginning to pay off, as CONSOL has seen improving margins and profits. For its latest quarter, CNX saw a 34% jump in year-over-year gas production, and its profit margin on that production jumped nearly 45%.
The company expects 2015’s and 2016’s production to grow by 30%. That’s great news considering that natural gas production helped the energy stock report a profit for the quarter versus a loss for previous time period a year ago.
For investors, Soros’ buy is an astute bet on a working turnaround. One that regular retail investor should follow.
Energy Stocks The Smart Money Is Buying Now — Cobalt Energy
Paulson & Co (John Paulson)
According to his latest 13F, Paulson increased his stake in CIE shares by 50%, buying almost 14 million shares of the energy stock. However, he wasn’t done yet. Paulson also increased his stake in CIE warrants and options by 446%. All in all, the fund manager known for making big bets is making a pretty big one on CIE shares.
CIE isn’t without risk, however.
While its Gulf of Mexico assets are pretty tame, CIE’s risk stems from its assets off the coast of Angola. That region has given it some trouble lately. Issues with the Angolan government over royalty rates, export potential and most recently a Wells Notice from the SEC have depressed shares of the firm.
However, that acreage in Angola is a monster find for the energy stock and potentially for Paulson if the situation clears itself. It’s not a slam dunk, but shares have fallen hard over the last few months, making CIE a potential bargain — albeit a risky one. But it’s a risk that Paulson seems to be content with owning.
For investors, CIE could be a huge win as the issues in Angola work themselves out.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.