T. Boone Pickens' BP Capital Buys 7 New Stocks

Energy-focused fund releases quarterly portfolio

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May 09, 2018
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BP Capital Fund Advisors, the hedge fund of legendary oil tycoon T Boone Pickens (Trades, Portfolio), disclosed it established seven new positions when it released its first-quarter portfolio on Monday.

Citing poor health and diminishing performance, Pickens announced in a letter in January that he was shutting down his hedge fund and transitioning it to a family office structure. BP Capital, however, will continue to operate its energy-focused mutual funds. In addition, CNBC reported in February that the New York Stock Exchange was launching an exchange-traded fund that reflects the oilman’s investing philosophy, called the NYSE Pickens Oil Response ETF (BOON, Financial).

During the quarter, the fund established holdings in Andeavor (ANDV, Financial), Pan American Silver Corp. (PAAS, Financial), Devon Energy Corp. (DVN, Financial), The Timken Co. (TKR, Financial), Nutrien Ltd. (NTR, Financial), Jagged Peak Energy Inc. (JAG, Financial) and Cimarex Energy Co. (XEC, Financial).

Andeavor

Having previously exited a position in Andeavor in the first quarter of 2017, the fund established a new holding of 45,609 shares for an average price of $104.28 per share, giving it 1.98% portfolio space.

The San Antonio, Texas-based oil and gas refiner, which is being acquired by Marathon Petroleum Corp. (MPC), has a market cap of $20.94 billion; its shares were trading around $138.55 on Wednesday with a price-earnings ratio of 12.58, a price-book ratio of 2.17 and a price-sales ratio of 0.54.

The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.

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Weighed down by debt and an Altman Z-Score of 2.53, GuruFocus rated Andeavor’s financial strength 5 out of 10. Its profitability and growth was also rated 5 out of 10 despite having expanding operating margins, a moderate Piotroski F-Score of 6 and a two-star (out of five) business predictability rating.

Of the gurus invested in Andeavor, Lee Ainslie (Trades, Portfolio) has the largest position with 1.44% of outstanding shares. Hotchkis & Wiley, Steven Cohen (Trades, Portfolio), Jim Simons (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Stanley Druckenmiller (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Manning & Napier Advisors Inc., Ron Baron (Trades, Portfolio) and David Dreman (Trades, Portfolio) are also shareholders.

Pan American Silver

The fund invested in 258,417 shares of Pan American Silver for an average price of $15.92 per share, expanding the portfolio 1.8%.

The Canadian miner has a market cap of $2.53 billion; its shares were trading around $16.50 on Wednesday with a price-earnings ratio of 20.78, a price-book ratio of 1.68 and a price-sales ratio of 3.08.

According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.

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Boosted by a comfortable level of interest coverage and a strong Altman Z-Score of 3.61, GuruFocus rated Pan American’s financial strength 8 out of 10. Its profitability and growth was rated 7 of 10 as its operating margin outperforms 85% of competitors. In addition, it has a moderate Piotroski F-Score of 5 and a one-star business predictability rating.

With 2.5% of outstanding shares, Simons is the company’s largest guru shareholder. Pioneer, Donald Smith (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and John Hussman (Trades, Portfolio) also own the stock.

Devon Energy

Pickens’ fund purchased 125,207 shares of Devon Energy for an average price of $36.71 per share. The trade had an impact of 1.72% on the portfolio. The fund previously closed a position in the company in the second quarter of 2015.

Headquartered in Oklahoma City, the natural gas producer has a market cap of $20.75 billion; its shares were trading around $39.65 on Wednesday with a price-earnings ratio of 165.20, a price-book ratio of 2.34 and a price-sales ratio of 1.46.

Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.

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As a result of poor interest coverage and an Altman Z-Score of 1.17, which indicates the possibility of bankruptcy, Devon’s financial strength was rated 4 out of 10 by GuruFocus. Its profitability and growth, however, fares a bit better with a rating of 6 of 10, boosted by an operating margin that outperforms 59% of competitors, a Piotroski F-Score of 6 and a one-star business predictability rating.

Diamond Hill Capital (Trades, Portfolio) is the company’s largest guru shareholder with 1.51% of outstanding shares. Other guru shareholders include Barrow, Hanley, Mewhinney & Strauss, Simons, Tweedy Browne (Trades, Portfolio), John Griffin (Trades, Portfolio), Pioneer, Druckenmiller, Arnold Van Den Berg (Trades, Portfolio) and Ray Dalio (Trades, Portfolio).

Timken

BP Capital bought 84,894 shares of Timken for an average price of $48.13 per share, giving it 1.67% portfolio space.

The Ohio-based manufacturer of bearings and transmission components has a market cap of $3.74 billion; its shares were trading around $48.18 on Wednesday with a price-earnings ratio of 15.50, a price-book ratio of 2.48 and a price-sales ratio of 1.21.

The Peter Lynch chart below shows the stock is trading near its fair value.

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GuruFocus rated Timken’s financial strength 6 out of 10. While the company has been issuing new long-term debt over the past several years, it is still manageable. In addition, it has a high Altman Z-Score of 3.20, indicating stability. Despite the fact its operating margin is in decline, the company’s profitability and growth was rated 7 of 10 as it has a moderate Piotroski F-Score of 5 and a one-star business predictability rating.

Of the gurus invested in Timken, Cohen has the largest holding with 0.71% of outstanding shares. Pioneer, Simons, Royce, Mario Gabelli (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss also own the stock.

Nutrien

The fund invested in 72,636 shares of Nutrien for an average price of $50.11 per share, expanding the portfolio 1.48%.

The Canadian producer of agricultural inputs, which was recently formed by the merger of Potash Corp. of Saskatchewan and Agrium, has a market cap of $30 billion; its shares were trading around $48.75 on Wednesday with a price-earnings ratio of 47.16, a price-book ratio of 1.95 and a price-sales ratio of 3.49.

According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.

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As Nutrien has been issuing new long-term debt over the past several years, GuruFocus rated its financial strength 5 out of 10. Its Altman Z-Score of 3.03, however, indicates the company is financially stable. The company’s profitability and growth was rated 6 out of 10 despite having a declining operating margin. It benefits from a strong Piotroski F-Score of 7 and a one-star business predictability rating.

With 0.08% of outstanding shares, Jerome Dodson (Trades, Portfolio) is the company’s largest guru shareholder. Simons, Pioneer, John Buckingham (Trades, Portfolio), Dalio and Dreman are also shareholders.

Jagged Peak Energy

BP Capital purchased 209,776 shares of Jagged Peak for an average price of $13.18 per share. The trade had an impact of 1.28% on the portfolio.

The Denver-based producer of crude oil and natural gas, which went public in January 2017, has a market cap of $3.05 billion; its shares were trading around $14.30 on Wednesday with a forward price-earnings ratio of 28.57, a price-book ratio of 4.39 and a price-sales ratio of 11.46.

Based on the chart below, the stock is trading below its historical median price-sales value.

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GuruFocus rated Jagged Peak’s financial strength 5 out of 10, boosted by its debt-to-equity ratio, which outperforms 93% of competitors. In addition, its Altman Z-Score of 3.36 indicates it is financially healthy. Its profitability and growth was rated 4 of 10, weighed down by a negative operating margin that underperforms 82% of competitors and a moderate Piotroski F-Score of 5.

Cohen is the company’s largest guru shareholder with 0.52% of outstanding shares. Simons is also a shareholder.

Cimarex Energy

The fund bought 29,149 shares of Cimarex Energy for an average price of $107.01 per share, giving it 1.18% portfolio space.Ă‚

The Denver-based oil and gas producer has a market cap of $9.37 billion; its shares were trading around $98.21 on Wednesday with a price-earnings ratio of 18.92, a price-book ratio of 3.64 and a price-sales ratio of 4.80.Ă‚

The Peter Lynch chart below shows the stock is overpriced as it is trading above its fair value.Ă‚

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Cimarex's financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. Not only does the company have a comfortable level of interest coverage, but its Altman Z-Score of 3.18 implies it is financially healthy. While its operating margin is declining, it is saved by a high Piotroski F-Score of 8 and a one-star business predictability rating.

With 5.33% of outstanding shares, Diamond Hill Capital is the company's largest guru shareholder. Charles de Vaulx, Cohen, Pioneer, First Pacific Advisors, Simons, Columbia Wanger and several others also own the stock.Ă‚

Other trades

During the quarter, Pickens’ fund also added to its holdings of Shell Midstream Partners LP (SHLX, Financial), Kinder Morgan Inc. (KMI, Financial), Enbridge Energy Partners LP (EEP, Financial) and many others.

The $96 million portfolio is largely invested in the energy sector, with substantially smaller positions in the basic materials and industrials sectors. According to its fact sheet, the TwinLine MLP Fund outperformed its benchmark, the Alerian MLP Index, in 2017 with a return of -4.75%. The index posted a -6.52% return.

Disclosure: No positions.