In 1997 Pickens founded BP Capital Management (then called BP Energy Fund). He holds a 46% interest in the company which runs two hedge funds, Capital Commodity and Capital Equity, both of which invest primarily in traditional energy companies such as oil, natural gas, and nuclear power corporations like Halliburton, Schlumberger, and Shaw Group.
As an oilman, Pickens devotes most of his attention to energy, forecasting the behavior of the energy market and then making large bets on the performance of futures or derivatives, possibly going long or short. Doing nothing in moderation, Pickens makes large directional bets, which produces not only large profits but also large losses. In 1997, he started a commodities fund which eventually lost 90% in less than 2 years. An analysis of Pickens performance: “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”.
Currently, Pickens makes headlines based more on his work as an energy lobbyist, rather than an investment guru. Apart from his advocacy, Pickens has been betting on rising oil prices, caused by American dependency on multiple hostile foreign states. Pickens predicts that “oil prices could rise to $120 to $150 a barrel” (Wall Street Pit). This attitude is reflected in his financial decisions, consistently investing in domestic and western energy and exploration companies.
|Top Five Holdings in 2010||Ticker||Percent Composition||Number of Shares|
|Chesapeake Energy Corp.||CHK||8.29%||883,348|
|McMoran Exploration Co||MMR||7.28%||1,171,660|
|Weatherford Intl. Ltd.||WFT||7.23%||875,340|
|Plains Exploration & Production Company||PXP||7.04%||604,202|
Chesapeake Energy Corp. (CHK)
Chesapeake Energy Corporation is a producer of natural gas in the United States. It owns interests in approximately 44,100 producing natural gas and oil wells that are producing approximately 2.4 billion cubic feet equivalent, per day, 93% of which is natural gas. The Company is focused on discovering, acquiring and developing conventional and unconventional natural gas reserves onshore in the United States.
Their shares trade around $32.21, with a P/E ratio of 13.79 and an EPS of $2.34. In the last quarter of 2010, the Chesapeake Energy Corporation had revenue of $1.9 billion and a net income of $223 million. Over the past ten years, CHK has seen an annual revenue growth of 17.2% per share. Chesapeake Energy has performed 7.5% better than the Dow –Jones Average over the past five years, and has seen steady revenue growth over the past 10 years, despite current economic turbulence. Chesapeake has been regularly undervalued, given its performance, for the past several years. Pickens has strategically taken advantage of this opportunity, and has made Chesapeake a crucial part of his energy stance. GuruFocus rated CHK with the business predictability rank of 2-star.
BP PLC (BP)
BP p.l.c. is an international oil and gas company. The Company operates in more than 80 countries, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products. The Company operates two segments: Exploration and Production, and Refining and Marketing.
Their shares trade around $45.94, with an EPS of -$1.24. In the last quarter of 2010, BP had revenue of $83 billion and a net income of $5.5 billion. After the Deepwater Horizon incident, BP stocks took a large hit, presenting an investment opportunity. At the time, Pickens described the opportunity to Fortune Magazine: “As far as stocks are concerned, this could mean a buying opportunity. As long as there's political uncertainty around the energy space, stock prices will come down” (Fortune). Pickens picked up a large portion of stocks around this time, and BP’s recovery has bolstered Pickens’s portfolio. Over the past ten years, BP has seen an annual revenue growth of 9.5% per share. GuruFocus rated BP with the business predictability rank of 3-star.
McMoran Exploration Co (MMR)
McMoRan Exploration Co. is engaged in the exploration, development and production of oil and natural gas offshore in the Gulf of Mexico and onshore in the Gulf Coast area of the United States. Its oil and gas operations are conducted through its principal operating subsidiary, McMoRan Oil & Gas LLC. The Company may engage in multi-faceted energy services development of the Main Pass Energy Hub, through its wholly owned subsidiary, Freeport-McMoRan Energy LLC.
Their shares trade around $16.26, with an EPS of -$2.02. In the last quarter of 2010, the McMoran Exploration Co had revenue of $99 million and a net income of -$29 million. In conjunction with his energy plan, Pickens invested heavily in McMoran Exploration, and has been very bullish about its performance. Over the past ten years, MMR has seen an annual revenue growth of 11.2% per share. GuruFocus rated MMR with the business predictability rank of 1-star.
Weatherford Intl. Ltd. (WFT)
Weatherford International Ltd. is a provider of equipment and services used in the drilling, evaluation, completion, production and intervention of oil and natural gas wells. It conducts operations in approximately 100 countries and has service and sales locations in the oil and natural gas producing regions in the world. The Company’s product offerings are grouped into ten service lines: drilling services; artificial lift systems; well construction; completion systems; integrated drilling; drilling tools, re-entry and fishing; stimulation and chemicals services; wireline and evaluation services, and pipeline and specialty services. Its geographic reporting segments include North America, Latin America, Europe/West Africa/ the Former Soviet Union and Middle East/North Africa/Asia.
Their shares trade around $20.41, with an EPS of -$.15. In the last quarter of 2010, Weatherford International had revenue of $2.9 billion and a net income of -$53 million. Over the past ten years, WFT has seen an annual revenue growth of 15% per share. GuruFocus rated WFT with the business predictability rank of 1-star.
Plains Exploration & Production Company (PXP)
Plains Exploration & Production Company is an independent oil and gas company engaged in the activities of acquiring, developing, exploring and producing oil and gas properties primarily in the United States. The Company owns oil and gas properties with principal operations in Onshore California, Offshore California, the Gulf Coast Region, the Gulf of Mexico, the Mid-Continent Region and the Rocky Mountains. It also has an interest in an exploration block offshore Vietnam.
Their shares trade around $33.82, with a P/E ratio of 46.48 and an EPS of $0.73. In the last quarter of 2010, the Plains Exploration & Production Company had revenue of $408 million and a net income of -$19 million. Over the past ten years, PXP has seen an annual revenue growth of 10.20% per share. In 2008, this growth was stunted, but PXP quickly bounced back.
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