BP Capital Fund Advisors, the investment firm founded by legendary oil tycoon T Boone Pickens (Trades, Portfolio), disclosed five new holdings in its second-quarter portfolio, which was released last week.
The guru’s Texas-based firm, which transitioned to a family office structure last year, operates two energy-focused mutual funds. When picking stocks, the portfolio managers look for companies that will benefit from the changing landscape of the U.S. oil and gas industry.
Based on these criteria, BP Capital established positions in Valero Energy Corp. (VLO, Financial), Exxon Mobil Corp. (XOM, Financial), Royal Dutch Shell PLC (RDS.A, Financial), TPI Composites Inc. (TPIC, Financial) and ConocoPhillips (COP, Financial) during the quarter.
Valero Energy
After selling out of Valero in second-quarter 2018, the firm opened a new 29,650-share holding, giving it 1.87% space in the equity portfolio. The stock traded for an average price of $82.55 per share during the quarter.
The San Antonio, Texas-based oil refiner has a $32.7 billion market cap; its shares were trading around $78.92 on Tuesday with a price-earnings ratio of 12.97, a price-book ratio of 1.52 and a price-sales ratio of 0.29.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Valero’s financial strength 6.4 out of 10. Although the company has issued approximately $1 billion in new long-term debt over the past three years, it is at a manageable level as a result of adequate interest coverage. In addition, the robust Altman Z-Score of 4 indicates the company is in good financial health.
The company’s profitability and growth did not fare as well, scoring a 3 out of 10 rating. Although the operating margin is expanding, it still underperforms over half of its competitors. Valero is supported by a moderate Piotroski F-Score of 5, which implies stable operating conditions, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
Of the gurus invested in Valero, Barrow, Hanley, Mewhinney & Strauss has the largest stake with 1.45% of outstanding shares. Joel Greenblatt (Trades, Portfolio) and Louis Moore Bacon (Trades, Portfolio) also established positions during the quarter, while Pioneer Investments (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) reduced their holdings. John Hussman (Trades, Portfolio) is also a shareholder.
Exxon Mobil
Having previously exited a position in Exxon Mobil in the fourth quarter of 2013, the firm entered a new 20,250-share holding. The trade had an impact of 1.14% on the equity portfolio. During the quarter, the stock traded for an average price of $77.42 per share.
The oil and gas company, which is headquartered in Irving, Texas, has a market cap of $292.67 billion; its shares were trading around $68.90 on Tuesday with a price-earnings ratio of 16.74, a price-book ratio of 1.54 and a price-sales ratio of 1.08.
According to the Peter Lynch chart, the stock is overvalued.
Exxon Mobil’s financial strength was rated 6.3 out of 10 by GuruFocus, driven by comfortable interest coverage and a robust Altman Z-Score of 3.64, which suggests the company is in good standing financially.
The company’s profitability and growth scored a 4 out of 10 rating on the back of a declining operating margin, returns that outperform at least half of industry peers and a moderate Piotroski F-Score of 6. In addition, Exxon has recorded a decline in revenue per share for the past five years. It also has a one-star business predictability rank.
With 0.44% of outstanding shares, First Eagle Investment (Trades, Portfolio) is the company’s largest guru shareholder. Other top guru investors include Fisher, the T Rowe Price Equity Income Fund (Trades, Portfolio), Pioneer, Richard Pzena (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Greenblatt and Tom Russo (Trades, Portfolio).
Royal Dutch Shell
Pickens’ firm invested in 23,750 shares of Royal Dutch shell, dedicating 1.14% of the equity portfolio to the holding. The stock traded for an average per-share price of $63.93 during the quarter.
The Netherlands-based integrated oil and gas company has a $223.45 billion market cap; its shares were trading around $55.64 on Tuesday with a price-earnings ratio of 11.86, a price-book ratio of 1.24 and a price-sales ratio of 0.65.
Based on the Peter Lynch chart, the stock appears to be undervalued.
GuruFocus rated Royal Dutch Shell’s financial strength 5.4 out of 10. Despite having adequate interest coverage, the Altman Z-Score of 2.40 suggests the company is under some financial stress as its revenue per share has been in decline for the past five years.
The company’s profitability and growth scored a 4 out of 10 rating on the back of margins and returns that underperform at least half of competitors. Shell also has a high Piotroski F-Score of 7, which indicates operating conditions are healthy, and a one-star business predictability rank.
Fisher has the largest stake in the company with 0.34% of outstanding shares. Jones also established a position during the quarter, while Pioneer, Scott Black (Trades, Portfolio), Murray Stahl (Trades, Portfolio) and Gabelli added to their holdings. Mairs and Power (Trades, Portfolio), Russo, Auxier, Jeremy Grantham (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), Pzena, Hotchkis & Wiley and Dodge & Cox also hold the stock.
TPI Composites
BP Capital picked up 42,850 shares of TPI Composites, allocating 0.78% of the equity portfolio to the position. Shares traded for an average price of $25.60 during the quarter.
Headquartered in Scottsdale, Arizona, the company, which manufactures composite blades for wind turbines, has a market cap of $615.19 million; its shares were trading around $17.50 on Tuesday with a price-book ratio of 3.02 and a price-sales ratio of 0.63.
The median price-sales chart suggests the stock is overvalued.
Weighed down by weak interest coverage, TPI’s financial strength was rated 5 out of 10 by GuruFocus. In addition, the Altman Z-Score of 2.29 indicates the company is under some financial pressure. TPI has recorded a slowdown in revenue per share growth over the past 12 months.
The company’s profitability and growth did not fare as well, scoring a 3 out of 10 rating on the back of negative margins and returns that underperform a majority of industry peers. TPI also has a low Piotroski F-Score of 2, which implies poor business conditions.
Of the gurus invested in TPI, Pioneer has the largest holding with 2.77% of outstanding shares. Ron Baron (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Leucadia National (Trades, Portfolio) and Grantham are also shareholders.
ConocoPhillips
The firm purchased 16,500 shares of ConocoPhillips, expanding the equity portfolio by 0.74%. During the quarter, the stock traded for an average price of $62.26 per share.
The Houston-based oil and gas producer has a $59.88 billion market cap; its shares were trading around $53.94 on Tuesday with a price-earnings ratio of 8.70, a price-book ratio of 1.87 and a price-sales ratio of 1.73.
According to the Peter Lynch chart, the stock is undervalued.
GuruFocus rated ConocoPhillips’ financial strength 5.7 out of 10. Despite having comfortable interest coverage, the Altman Z-Score of 2.76 suggests the company is under some financial pressure as its revenue per share has been in decline for the past five years.
The company’s profitability and growth scored a 5 out of 10 rating. While the operating margin is underperforming competitors, the returns outperform over 60% of industry peers. In addition, ConocoPhillips has a high Piotroski F-Score of 8 and a one-star business predictability rank.
With 0.36% of outstanding shares, Cohen is ConocoPhillips’ largest guru shareholder. Other top guru investors include First Eagle, Fisher, Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Pioneer, Yacktman Assets Management, Greenblatt, Leucadia, Ray Dalio (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Jones, Auxier, Gabelli and Dodge & Cox.
Additional trades
During the quarter, BP Capital also boosted its positions in many other companies, including MPLX LP (MPLX, Financial), ONEOK PLC (OKE), Magellan Midstream Partners LP (MMP, Financial), Enterprise Products Partners LP (EPD, Financial) and Westlake Chemical Corp. (WLK, Financial).
The firm’s $136 million equity portfolio consists of 41 positions. While the majority of the portfolio is composed of energy stocks, the basic materials and industrials sectors are also represented.
Among its energy holdings, midstream companies have the largest presence at 64.87%.
Disclosure: No positions.
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