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T. Boone Pickens: A Billionaire's Top 10 Energy Stocks

 August 23, 2013 02:37 PM

T Boone Pickens is a legendary businessman and investor. With a net worth approaching $2 billion he is one of the richest people in the world.

T Boone built his fortune on a hugely successful career as one of the leading investors and personalities in the energy industry. After studying Geology at Oklahoma A&M, he worked for Phillips Petroleum for 5 years before branching off on his own and founding Mesa Petroleum, which would grow into one of the largest and most successful energy companies in the world.

T Boone would go on to own many other energy companies and start a $100-million hedge fund that specializes in investing in energy companies, lifting him to the status as a billionaire and one of the most successful energy investors of all time. So when T Boone talks about important trends in the energy or makes an investment in an energy company, the Street listens very closely.

[Related -CONSOL Energy Inc. (NYSE:CNX): Lots Of Upside Potential Ahead]

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And right now, T Boone's hedge fund, BP Capital, with over $100 million under management, is making huge investments in energy companies. In fact, every single one of his top 10 holdings comes from the energy sector. Here is a look at the 10 energy stocks that T Boone is holding in his hedge fund and his allocation to each.

  • Pioneer Natural Resources Co. (PXD) 13%
  • Apache Corp. (APA) 10%
  • Goodrich Petroleum (GDP) 9%
  • Devon Energy Corp (DVN) 7%
  • Occidental Petroleum (OXY) 6%
  • Tesoro Corp (TSO) 6%
  • Marathon Petroleum Corp (MPC) 6%
  • Gulfport Energy Corp (GPOR) 6%
  • Phillips 66 (PSX) 6%
  • Consol Energy (CNX) 5%

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From the group, I have chosen to profile Apache Corp. because of its recent pullback and Occidental Petroleum Corp because of its diversified business model.

Apache Corp

Apache is one of my favorite energy stocks, specializing in exploration and production with a world-class portfolio of drilling rights across the world and a market cap of $31 billion. Shares recently fell 10% in one day on an analyst downgrade related to the company's interests in the politically unstable Egypt. While that political uncertainty in one of the company's key assets is a head wind, Apache is still a great company and stock and in position to cash in on $105 crude. In the meantime, this stocks looks like a great deal, trading with a forward P/E of 10x, a sharp discount to its peer average of 17.5x. If Apache merely traded with the same valuation as its peers, shares would jump to $136, a 70% premium from current levels.

Occidental Petroleum Corp.

Occidental is an integrated energy company, operating in exploration and production, refining and marketing. That gives the company a more diversified approach to the energy market, where Occidental is a major player with a market cap of $70 billion. Shares have been relatively strong in 2013 compared to some of its weaker peers, with shares up 10% on the year. But Occidental still looks like a great buy with plenty of value, trading with a forward P/E of 12x, directly in line with its peer average. Analysts are calling for steady earnings growth of 6.5% annually in the next 5 years. And when you throw in the company's 3% dividend yield, Occidental has value, growth and a solid stream of income.

The Takeaway

T Boone Pickens is a legendary energy investor with a net worth close to $2 billion. That means his investments are closely watched by the Street, and right now, all 10 of the top holdings in his portfolio are energy companies. From the group, my top 2 picks are Apache because of its incredible value and Devon because of its diversified business model. It's another chance to invest like one of the greats, who has been scoring huge gains in the energy industry for the last 40 years.

For more top stock picks and analysis, check out a 4-week free trial to Michael's premium newsletter the iStock Growth Trader. The iStock Growth Trader is loaded with the hottest trends, the best stocks and detailed analysis that will keep your portfolio one step ahead of the game.



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