A $1 Billion-Plus American Oil Financier is Buying These Stocks

T. Boone Pickens is an oilman turned fund manager. Instead of taking risks in the oil (NYSE:USO) fields, Pickens now takes risks in financial markets. His investment strategy is quite straightforward. He forecasts the direction of energy markets and then makes outsized bets in mostly futures and derivatives markets. Depending on his call, he might go long or short. Since he makes directional bets, sometimes his losses are staggering. In 1997, he started a commodities fund which eventually lost 90% in less than 2 years.

Katherine Burton profiled Boone Pickens in her book “Hedge Hunters”. Boone Pickens’ most memorable quote from the book is “Most of my ideas work, but the timing gets screwed up every once in a while”. Here is an excerpt from the book about Boone Pickens’ performance until 2008:

His energy stock hedge funds, which invest 90 percent in equities and 10 percent in commodities, averaged returns of about 38 percent a year through mid-2007 since starting in August 2001. His oil and gas commodities fund distributed about $2.8 billion to investors since he started it in 1997. About $1.6 billion of the $4.3 billion BP Capital manages is Pickens’s personal fortune. New clients pay a 1.75 percent management fee and 30 percent of any profit.”

Insider Monkey, your source for free insider trading data, analyzed Boone Pickens’ latest 13F filings. Pickens added 5 new companies (EOG, NOV, DYN, GST, and AONE) to his portfolio and increased his holdings in 5 more companies. Here is how they performed since the end of 2010:

Company Ticker Return Value (Millions)
CHESAPEAKE ENERGY CORP (NYSE:CHK) 37.4% 23
BP PLC (NYSE:BP) 10.7% 23
PLAINS EXPL& PRODTN CO (NYSE:PXP) 21.9% 19
QEP RES INC (NYSE:QEP) 8.9% 17
EOG RES INC (NYSE:EOG) 23.1% 16
NATIONAL OILWELL VARCO INC (NYSE:NOV) 18.3% 11
HALLIBURTON CO (NYSE:HAL) 15.2% 11
DYNEGY INC DEL (NYSE:DYN) 3.0% 8
GASTAR EXPL LTD (AMEX:GST) 15.1% 5
A123 SYS INC (NASDAQ:AONE) -0.6% 4

The value weighted return for these 10 stocks was 18.3% during the first two months of 2010, beating the SPY’s 5.9% return by a large margin. T. Boone Pickens got a big boost from the increase in energy prices. John Griffin’s Blue Ridge Capital, David Einhorn’s Greenlight Capital, and Whitney Tilson’s T2 Partnershave BP in their portfolios. Tilson is extremely bullish about BP. PXP is Steve Cohen’s one of three top picks. Carl Icahn made a bundle from his recent investments in CHK.

Boone Pickens’ portfolio performed spectacularly in 2011 too. The 23 stock portfolio returned 18% in 2011, beating the SPY by more than 12 percentage points. Here is how each stock performed:

Company Ticker Return Value (Millions)
CHESAPEAKE ENERGY CORP (NYSE:CHK) 37.4% 23
BP PLC (NYSE:BP) 10.7% 23
MCMORAN EXPLORATION CO (NYSE:MMR) 2.1% 20
WEATHERFORD INTERNATIONAL LT (NYSE:WFT) 6.1% 20
PLAINS EXPL& PRODTN CO (NYSE:PXP) 21.9% 19
QEP RES INC (NYSE:QEP) 8.9% 17
EOG RES INC (NYSE:EOG) 23.1% 16
SANDRIDGE ENERGY INC (NYSE:SD) 47.7% 14
SUNCOR ENERGY INC NEW (NYSE:SU) 22.8% 14
NOBLE CORPORATION BAAR (NYSE:NE) 25.4% 12
DEVON ENERGY CORP NEW (NYSE:DVN) 16.5% 12
NATIONAL OILWELL VARCO INC (NYSE:NOV) 18.3% 11
OCEANEERING INTL INC (NYSE:OII) 13.6% 11
HALLIBURTON CO (NYSE:HAL) 15.2% 11
DAWSON GEOPHYSICAL CO (NASDAQ:DWSN) 56.5% 8
DYNEGY INC DEL (NYSE:DYN) 3.0% 8
OCCIDENTAL PETE CORP DEL (NYSE:OXY) 3.9% 7
TRANSATLANTIC PETROLEUM LTD (AMEX:TAT) -2.1% 7
GASTAR EXPL LTD (AMEX:GST) 15.1% 5
WILLIAMS CLAYTON ENERGY INC (NASDAQ:CWEI) 26.3% 5
A123 SYS INC (NASDAQ:AONE) -0.6% 4
CONSOL ENERGY INC (NYSE:CNX) 4.3% 4
MURPHY OIL CORP (NYSE:MUR) -1.0% 4

John Burbank’s Passport Capital is another hedge fund that is extremely bullish about energy companies. They have SU and SD in their portfolio, and these stocks returned an average of 35% since the beginning of this year.

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