As great investors often do it seems Carl Icahn stepped up in the second quarter of this year and made a big bet on the energy sector.
According to a regulatory filing made last week Icahn invested $929 million or 18% of his hedge fund in energy stocks during the market drop in Q2. In July Icahn’s fund was up 8% which undoubtedly was helped by these energy investments.
Icahn has been quoted in the past as saying that he can buy oil cheaper on Wall Street than he can on the oilfield. I’d tend to agree that this is very true today as most oil companies that I look at are not priced for long term $80 oil prices.
In past years Icahn has been famously involved in takeover battles for companies such as Texaco Inc and Phillips Petroleum. Boone Pickens first book details the wars for these companies that took place in the 1980s as aggressive investors fought to have companies unlock value hidden under sleepy managements.
As the world finds itself reaching the maximum rate that it can produce oil at while demand continues to grow we are going to find ourselves faced with a future of higher oil prices. I don’t know if that is what Icahn was considering when he invested in Q2, but it is something that every investor should at the very least consider.
My favorite oil stock is a rapidly going Deepwater producer called ATP Oil and Gas. It sold off heavily on Friday due to a large quarterly loss related mostly to one time charges related to the BP spill and a large debt restructuring (which was a good thing). While the stock market focuses on one time quarterly earnings items, an opportunity may have been made for those of us with a more long term focus. Here is an article I wrote on ATP as well as a couple of other oil related ideas:
ATP Oil and Gas
http://www.gurufocus.com/news.php?id=101862
Chesapeake Energy
http://www.gurufocus.com/news.php?id=101898
Cobalt Energy http://www.gurufocus.com/news.php?id=101391
