On the back of falling U.S. crude inventories and persisting political tension in the Middle East, oil rose to $70 per barrel for the first time since July on Wednesday.
According to CNBC, the price of U.S. crude has been fairly rangebound all summer, hovering between $65 and $75 per barrel. Gas prices, which have been around $2.85 per gallon since mid-June, are not expected to drastically drop heading into fall as the Trump administration’s impending sanctions on Iran are supporting prices.
Two guru investors who have large positions in the energy sector are Arnold Schneider (Trades, Portfolio) and T Boone Pickens (Trades, Portfolio). Approximately 44.37% of Schneider Capital Management’s equity portfolio is made up of energy stocks. BP Capital Management, the hedge fund of oil tycoon Pickens, has an even larger presence with roughly 88.61% of its equity portfolio dedicated to the sector.
As of the second quarter, two holdings they have in common are MRC Global Inc. (MRC, Financial) and Oasis Petroleum Inc. (OAS, Financial).
MRC Global
In the second quarter, Schneider upped his holding to 0.45% of MRC Global’s outstanding shares, while BP Capital’s position was pared to 0.15%.
The Houston-based distributor of pipes, valves, fittings and automation and measurement products to the oil and gas industry has a market cap of $1.87 billion; its shares were trading around $20.61 on Thursday with a price-earnings ratio of 36.31, a price-book ratio of 2.49 and a price-sales ratio of 0.48.
The Peter Lynch chart suggests the stock is overpriced since it is trading higher than its fair value.
Plagued by insufficient interest coverage and declining revenue per share, GuruFocus rated MRC Global’s financial strength 5 out of 10. In addition, the Altman Z-Score of 2.5 indicates the company is under some minor financial pressure. The company’s profitability and growth scored a 4 out of 10 rating despite having margins and returns that outperform industry peers. The Piotroski F-Score of 6 implies operating conditions are stable.
GuruFocus estimates Schneider has gained 24% on his investment since the first quarter of 2015. Pickens’ firm has gained approximately 20% on its investment since the third quarter of 2017.
Tweedy Browne (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss are also shareholders.
Top players in the oilfield services space are Schlumberger Ltd. (SLB, Financial), Baker Hughes, a GE Co. (BHGE, Financial), Halliburton (HAL, Financial) and National Oilwell Varco Inc. (NOV, Financial).
Oasis Petroleum
Both Schneider and BP Capital trimmed their positions in Oasis Petroleum during the second quarter. Pickens’ firm now holds 0.08% of its outstanding shares, while Schneider has 0.04%.
The petroleum and natural gas producer, which is also headquartered in Houston, has a $4.17 billion market cap; its shares were trading around $13.23 on Thursday with a forward price-earnings ratio of 28.65, a price-book ratio of 1.22 and a price-sales ratio of 2.26.
According to the Peter Lynch chart, the stock is overpriced since it is trading above its fair value.
As a result of issuing approximately $501.95 million in new long-term debt over the last three years, Oasis’ financial strength was rated 5 out of 10 by GuruFocus. In addition, the Altman Z-Score of 0.7 indicates the company is in danger of going bankrupt. The company’s profitability and growth scored a 4 out of 10 rating despite having margins and returns that outperform industry competitors. While the Piotroski F-Score of 4 suggests operations are stable, the company has reported declining revenue per share and operating losses for the past several years.
GuruFocus data shows Pickens’ firm has gained an estimated 38% on its investment since the fourth quarter of 2017. In contrast, Schneider has lost an estimated 25% since the first quarter of 2017.
Other gurus invested in the company are John Griffin (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Mairs and Power (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss.
Top players in the exploration and production space are ConocoPhillips (COP, Financial), EOG Resources (EOG, Financial), Occidental Petroleum (OXY, Financial) and Anadarko Petroleum Corp. (APC, Financial).
Performance
Schneider’s $509 million portfolio is composed of 48 stocks. According to the Pennsylvania-based firm's website, the Schneider Small Cap Value Fund returned 12.25% in 2017, outperforming the Russell 2000 Value Index’s 7.84% return.
BP Capital’s $221 million portfolio is composed of 52 stocks. According to the Texas-based firm's fact sheet, the TwinLine MLP Fund outperformed its benchmark in 2017, posting a -4.75% return. The Alerian MLP Indexp posted a return of -6.52%.
Disclosure: No positions.
