BP Capital Fund Advisors, the investment firm founded by the late T Boone Pickens (Trades, Portfolio), who passed away in September, disclosed eight new holdings in its third-quarter portfolio earlier this week.
The legendary oil tycoon’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’s five largest new buys for the quarter were Chevron Corp. (CVX, Financial), BP PLC (BP, Financial), Nutrien Ltd. (NTR, Financial), Granite Construction Inc. (GVA, Financial) and EOG Resources Inc. (EOG, Financial).
Chevron
Having previously exited a position in Chevron in the first quarter of 2017, the firm entered a new 13,800-share holding. The trade had an impact of 1.34% on the equity portfolio. The stock traded for an average price of $121.42 per share during the quarter.
The San Ramon, California-based energy company has a market cap of $231.4 billion; its shares were trading around $121.13 on Friday with a price-earnings ratio of 17.49, a price-book ratio of 1.48 and a price-sales ratio of 1.59.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Chevron’s financial strength 7 out of 10 on the back of comfortable interest coverage. The Altman Z-Score of 2.25, however, indicates the company is under some financial pressure since it has recorded a decline in revenue per share over the last five years.
The company’s profitability scored a 6 out of 10 rating on the back of margins and returns that outperform over half of its competitors, a moderate Piotroski F-Score of 6, which implies operations are stable, 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 Chevron, Ken Fisher (Trades, Portfolio) has the largest stake with 0.27% of outstanding shares. Other top guru shareholders include Barrow, Hanley, Mewhinney & Strauss, Pioneer Investments (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), David Carlson (Trades, Portfolio), NWQ Managers (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Dodge & Cox, Charles Brandes (Trades, Portfolio) and Mairs and Power (Trades, Portfolio).
BP
After divesting of a position in BP in the third quarter of 2013, BP Capital established a new holding of 42,500 shares, expanding the equity portfolio by 1.32%. During the quarter, the stock traded for an average price of $38.45 per share.
The British oil and gas producer has a market cap of $133.14 billion; its shares were trading around $38.99 on Friday with a price-earnings ratio of 28.39, a price-book ratio of 1.31 and a price-sales ratio of 0.47.
According to the Peter Lynch chart, the stock is overvalued.
BP’s financial strength and profitability were both rated 5 out of 10 by GuruFocus. As a result of issuing approximately $5.8 billion in new long-term debt over the past three years, the oil major has inadequate interest coverage. In addition, the low Altman Z-Score of 1.58 warns the company could be at risk of going bankrupt.
The company is also supported by margins and returns that outperform over half of its industry peers, as well as a moderate Piotroski F-Score of 4. BP’s one-star business predictability rank is on watch, however, since its revenue per share has been in decline for the past five years.
With 0.73% of outstanding shares, Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Fisher, Kahn Brothers (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Brandes, Sarah Ketterer (Trades, Portfolio), Caxton Associates (Trades, Portfolio) Jeff Auxier (Trades, Portfolio), Richard Snow (Trades, Portfolio), Ray Dalio (Trades, Portfolio) and several other gurus also own the stock.
Nutrien
The firm invested in 31,700 shares of Nutrien, giving it 1.29% space in the equity portfolio, after selling out of the stock in the first quarter. Shares traded for an average price of $51.05 during the quarter.
The Canadian company, which produces fertilizer, has a $28.23 billion market cap; its shares were trading around $49.04 on Friday with a price-earnings ratio of 6.93, a price-book ratio of 1.22 and a price-sales ratio of 1.41.
Based on the Peter Lynch chart, the stock appears to be undervalued.
GuruFocus rated Nutrien’s financial strength 4 out of 10. As a result of issuing approximately $689.9 million in new long-term debt over the last three years, the company has insufficient interest coverage. In addition, the Altman Z-Score of 1.66 warns it could be in danger of bankruptcy.
The company’s profitability fared better, scoring an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms more than half of its competitors. Nutrien is also supported by strong returns and a high Piotroski F-Score of 7, which suggests business conditions are healthy. It also has a one-star business predictability rank.
First Eagle Investment (Trades, Portfolio) is the company’s largest guru shareholder with 3.71% of outstanding shares. Other top guru investors include Dodge & Cox, Pioneer, Dalio and Mario Gabelli (Trades, Portfolio).
Granite Construction
BP Capital picked up 45,497 shares of Granite Construction, dedicating 1.19% of the equity portfolio to the position. The stock traded for an average per-share price of $34.77 during the quarter.
The construction company, which is headquartered in Watsonville, California, has a market cap of $1.31 billion; its shares were trading around $27.81 on Friday with a price-book ratio of 1.05 and a price-sales ratio of 0.37.
The median price-sales chart suggests the stock is undervalued since it is trading below its historical average.
Granite Construction’s financial strength and profitability were both rated 6 out of 10 by GuruFocus. The Altman Z-Score of 2.31 indicates the company is under some financial pressure.
Weighed down by negative margins and returns that underperform a majority of industry peers, the company also has a low Piotroski F-Score of 3, which implies operating conditions are poor. In addition, the one-star business predictability rank is on watch as a result of the company recording a decline in revenue per share over the past 12 months.
Of the gurus invested in Granite Construction, Pioneer has the largest holding with 1.94% of outstanding shares. Chuck Royce (Trades, Portfolio), Arnold Van Den Berg (Trades, Portfolio), Simons’ firm and Gabelli are also shareholders.
EOG Resources
Having previously closed a position in EOG Resources in the fourth quarter of 2018, the firm opened a new 17,000-share holding, allocating it to 1.03% of the equity portfolio. During the quarter, the stock traded for an average price of $81.03 per share.
The Houston-based oil and gas producer has a $43.23 billion market cap; its shares were trading around $74.45 on Friday with a price-earnings ratio of 14.4, a price-book ratio of 2.05 and a price-sales ratio of 2.47.
According to the Peter Lynch chart, the stock is trading near its fair value.
GuruFocus rated EOG’s financial strength 6 out of 10. Although the company has comfortable interest coverage, its revenue per share has been in decline for the last five years.
The company’s profitability scored a 7 out of 10 rating on the back of strong margins and returns that outperform a majority of competitors, a moderate Piotroski F-Score of 5 and a one-star business predictability rank.
With a 2.11% stake, Barrow, Hanley, Mewhinney & Strauss is EOG’s largest guru shareholder. Other top guru investors are Pioneer, PRIMECAP Management (Trades, Portfolio), Bill Nygren (Trades, Portfolio), John Rogers (Trades, Portfolio), Simons’ firm, Fisher, Dalio, Jeremy Grantham (Trades, Portfolio), Cohen and Paul Tudor Jones (Trades, Portfolio).
Additional trades
During the quarter, BP Capital also established positions in Noble Energy Inc. (NBL, Financial), Western Midstream Partners LP (WES, Financial), Noble Midstream Partners LP (NBLX, Financial) and Holly Energy Partners LP (HEP, Financial).
The firm’s $123 million equity portfolio consists of 41 stocks. While the majority of the portfolio is composed of energy stocks, the basic materials and industrials sectors have miniscule representations.
Among its energy holdings, midstream companies have the largest presence at 68.24%.
Disclosure: No positions.
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