3 sweet T. Boone Pickens stock picks
The legendary oilman's regulatory filings provides investors with great oil stock picks.
By Aaron Levitt
After graduating from Oklahoma State with a geology degree, T. Boone Pickens knew that energy was the sector for him.
In his 60-year business career -- first as a corporate raider, then as a legendary oil man -- Pickens has become one of the most successful institutional managers focused on the oil and natural gas markets.
Through various funds at BP Capital, T. Boone Pickens has amassed quite a fortune -- estimated to be worth around $950 million -- and has become an outspoken proponent of American energy independence.
So when Boone talks, investors should listen.
And while T. Boone Pickens is outspoken and appears regularly on financial television, the latest window into his thoughts comes from BP Capital’s latest 13F filing. Despite being dated for the end of the third quarter, the filing gives regular retail investors access to what the celebrated oilman is thinking. And that means grade-A stock ideas.
Here are three of Pickens’ best-looking holdings:
T. Boone Pickens continues to be ecstatic over the hydraulic fracking boom and shale oil/natural gas. As such, many of his stock picks play into shale production growth. One of the newest is a $3.4 million position in E&P firm EQT Corporation (EQT).
EQT produces natural gas and related natural gas liquids (NGLs) from the Appalachian Basin, better known as the prolific Marcellus Shale. The firm owns roughly 560,000 acres in the Marcellus alone and has 14,000 productive wells in the entire basin.
Those generously producing wells have helped EQT report some stellar earnings over the last few quarters. Its third-quarter adjusted earnings came in at 58 cents per share -- more than double the amount earned from the same period last year. Aside from production gains at EQT, the firm has benefited from its “drop-down” relationship with its pipeline subsidiary EQT Midstream (EQM). That has relationship has provided plenty of tax-friendly distributions back into EQT’s bottom line.
While it isn’t the cheapest stock, EQT shares do represent one of the major leaders in the Marcellus. It’s no wonder why Pickens loaded up.
Everyone loves a turnaround story. For T. Boone Pickens and BP Capital, that story happens to be oil service firm Weatherford International (WFT). Pickens increased the size of his position by 44% during the past three months.
The smallest of the big four oil service stocks, Weatherford has been rocked by an accounting investigation -- going back six years -- and major debt issues. Those problems have caused WFT to trail behind several of its rivals -- both big and small.
However, things could finally be looking up for WFT. The firm recently settled those nasty accounting issues and has gotten serious about cost controls to remove its $9 billion worth of IOUs. At the same time, WFT is exploring options for land drilling rig business unit. As drilling has gotten more efficient, the number of drilling rigs focused on land are piling up. That has caused the business unit to be a huge drag on WFT’s earnings over the years. One solution being proposed by Weatherford is to spin off the business via an IPO.
All in all, these moves could finally put some spark back into WFT shares.
Dwindling crack spreads over the last two quarters have hurt the refiner’s margins -- including industry stalwart Valero Energy (VLO). Sensing a bargain, T. Boone Pickens increased his stake in the nation’s largest independent downstream firm by 163%, adding another $2 million to his position.
That could be a smart move now that things are getting better at VLO.
First, those crack spreads are beginning to widen once again. The sheer amount of oil production is overflowing storage depots and is causing West Texas Intermediate prices to fall versus international standard Brent. That price difference means that margins will be on the uptick at VLO once again. Even more so as Valero has moved to exporting gasoline and other refined products in spades.
Then there is the firm’s pending midstream IPO to consider. The new MLP subsidiary will help VLO realize huge benefits and tax-deferred distributions once it gets cooking.
With a forward P/E of less than 10, investors are getting a huge deal on VLO shares -- especially when considering its story is on the uptick. Following Pickens' lead into Valero could be one of the best plays of the New Year.
And one of Pickens' other two energy picks is also fairly popular among the hedge-fund crowd.
More From InvestorPlace
- The Top 10 Dow Dividend Stocks for November
- Will the Dow Jones Hit 20,000?
- Global Trends -- And the Stocks to Buy to Play Them
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.
I'm going to invest with the guys who critique Pickens because they must make more money than Mr Pickens
( To the Nut Jobs: Valero VLO has had a excellent run and there's much more to go)
Fracking is our "savior". Let's keep the oil monies in the USA to build-up our own economy, create jobs, increase tax flow into our treasury.
Another thing we should do and FAST--the KEYSTONE PIPELINE. This key piece of infrastructure provides the same benefits as the above.
What are we waiting for? The politicians in Washington? That's who the enemy of a thriving economy with many good jobs for all really is. The Obama Method of redistributing wealth is worthless. It just shuffles the deck a little bit and doesn't create any REAL value.
The KEYSTONE and FRACKING are keys to our independence and job creation.
Mr Pickens has been so right for many years.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Stocks have rallied 177%, and while calling a top is the easiest thing to do, it might not be the most accurate.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.