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Two John Dorfman Guru Stock Picks BBEP and PXP

January 04, 2010 | About:
John Dorfman is a columnist for Bloomberg.com. Dorfman as a typical contrarian/value investor states “To make good profits in the stock market, it pays to go against the crowd.” He writes columns where he analyzes stocks from a value perspective, sometimes guessing whether Graham himself would own them.

picked 10 stocks with low P/Es that have a potential to outperform in 2009. He eliminated all stocks with more debt than equity and with a market cap below 500 million. He then analyzed the stocks with the 10 lowest P/E ratios.

The stock with the lowest P/E is a familiar name

BreitBurn Energy Partners L.P BBEP

BBEP is one of Seth Klarman’s Baupost Group’s largest holdings. Seth Klarman owns 8,495,939 shares as of 09/30/2009, which accounts for 8.53% of the $1.13 billion portfolio of The Baupost Group.

BreitBurn Energy Partners L.P. is an independent oil and gas limited partnership, recently formed by a subsidiary of Provident Energy Trust, focused on the acquisition, exploitation and development of oil and gas properties. BreitBurn's assets consist primarily of producing and non-producing crude oil reserves located in the Los Angeles Basin in California and the Wind River and Big Horn Basins in central Wyoming. Breitburn Energy Partners, L.p. - Common Units Rep has a market cap of $622.8 million.

BBEP is currently trading three times earnings. Dorfman states that investors usually buy MLPs for their dividends. BBEP used to pay a 52 cent a share dividend but slashed the dividend in April 2009. There is uncertainty as to when the company will reinstate the dividend. In addition the company is being sued by its largest shareholder Quicksilver resources. These factors have been responsible for the low multiple that the company is currently trading at.

Dorfman is more optimistic about the company and states that the company “has a rich pool of energy assets, with gas and oil reserves in Michigan, California and elsewhere. I believe BreitBurn will eventually restructure its debt and resume dividend payments. I consider the stock a good speculation at $11 or less. “

Dorfman’s screen also pulled up another low P/E energy company

Plains Exploration and Production PXP



PLAINS EXPLORATION & PRODUCTION COMPANY is an independent oil and gas company primarily 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 the Los Angeles and San Joaquin Basins onshore California; the Santa Maria Basin offshore California; the Piceance and Wind River Basins in the Rocky Mountains; the Permian Basin in West Texas and New Mexico; the Anadarko Basin in the Texas Panhandle, and the South Texas and Gulf Coast regions, including the Gulf of Mexico. Plains Exploration & Production Company has a market cap of $4.02 billion; its shares were traded at around $28.88. The stock is trading at a P/E of about four and is trading at less than book value.

As stated above the company owns oil properties off the coast of California. Dorfman thinks the company will benefit if Governor Schwarzenegger allows oil drilling off the coast of California.

PXP is owned by three gurus.

PRIMECAP Management owns 6,666,724 shares as of 09/30/2009, which accounts for 0.33% of the $56.46 billion portfolio of PRIMECAP Management.

John Keeley owns 211,920 shares as of 09/30/2009, a decrease of 27.71% of from the previous quarter. This position accounts for 0.09% of the $6.65 billion portfolio of Keeley Fund Management

The most significant guru holder in PXP is George Soros who has a very large stake in the company. George Soros owns 6,113,815 shares as of 09/30/2009, which accounts for 3.84% of the $4.41 billion portfolio of Soros Fund Management LLC.

Disclosure: Long BBEP

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website


Rating: 4.1/5 (11 votes)

Comments

valuefan
Valuefan premium member - 4 years ago
Thanks yswolinsky, This was an excellent article cause it cites someone very good not yet a guru on this board and then which gurus hold.

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