Exxon Mobil Corporation (XOM), Anadarko Petroleum Corporation (APC) Among The 10 Most Popular Energy Stocks Among Hedge Funds
Several weeks after the end of each quarter, hedge funds and other major investors file 13Fs with the SEC to disclose many of their long equity positions as of the end of the previous quarter. We track hundreds of these filings over time as part of our work researching investment strategies; we have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (check out the details on our strategy here). Our model portfolio which follows this strategy outperformed the S&P 500 by 33 percentage points in the last 11 months.
We can also go through our database and find hedge funds’ favorite picks in a number of areas, including energy stocks. Read on for our list of the ten energy stocks owned by the largest number of filers in our database as of the end of June.
The top energy stock among this group was Anadarko Petroleum Corporation (NYSE:APC), owned by 65 funds. The oil and gas company grew its business moderately over the last year, and analysts expect EPS to rise considerably over the next several years. Millennium Management, managed by billionaire Israel Englander, increased its stake in Anadarko Petroleum Corporation (NYSE:APC) by 41% (check out more stocks Millennium was buying).
Hedge funds’ favorite oil major is Occidental Petroleum Corporation (NYSE:OXY), with several funds initiating positions during Q2 2013. Occidental Petroleum Corporation (NYSE:OXY)’s trailing and forward P/Es are 16 and 12 respectively, representing a premium compared to most of the company’s peers in each case. Billionaire Leon Cooperman’s Omega Advisors reported a position of about 980,000 shares in its 13F (find Cooperman's favorite stocks).
Oilfield services weren’t ignored as 63 funds and other notable investors, including billionaire Steve Cohen’s SAC Capital Advisors, were long Schlumberger Limited. (NYSE:SLB). Research more stocks SAC owns. The stock trades at 18 times trailing earnings; we’d note that business has been good recently, as revenue rose 8% last quarter compared to the second quarter of 2012 with profits up at an even higher rate.
Halliburton Company (NYSE:HAL) was slightly less popular than its larger peer. The company has been struggling recently on weaker margins, but trades at a discount to Schlumberger Limited. (NYSE:SLB) in terms of forward earnings estimates as the Street expects a rebound. Brave Warrior Capital was the largest Halliburton shareholder out of the filers we track, nearly tripling the size of its position to 4.4 million shares.
Billionaire Paul Singer’s Elliott Management (see Singer's stock picks) has been leading an activist charge at Hess Corp. (NYSE:HES), which recently responded by agreeing to spin out its downstream operations. Many investors expect that this transaction will help management focus on E&P operations and improve efficiency, as is sometimes the case with spinouts. The stock is valued at 13 times forward earnings estimates.
Coming in sixth on our list is industry leading supermajor Exxon Mobil Corporation (NYSE:XOM). Both the trailing and forward P/Es here are 11, reflecting little expected growth in the company’s profits. The Bill and Melinda Gates Foundation Trust disclosed ownership of 7.6 million shares of Exxon Mobil Corporation (NYSE:XOM) (here are more of the trust's picks).
51 funds reported a position in Kinder Morgan Inc (NYSE:KMI), the natural gas pipelines and storage company, including billionaire Stephen Mandel’s Lone Pine Capital (find more stocks Mandel likes). Wall Street analysts consider Kinder Morgan Inc (NYSE:KMI) to have high growth potential as more nat gas infrastructure is built.
Warren Buffett’s Berkshire Hathaway owned $1.6 billion worth of refining and marketing company Phillips 66 (NYSE:PSX), another stock to make our top ten list. See Buffett's stock picks over time. With investors generally leery of the industry, the forward P/E here is only 8 even though analysts expect EPS growth in the future.
Several hedge funds bought into rapidly growing oil and gas producer EOG Resources Inc (NYSE:EOG) between April and June; others, such as Renaissance Technologies, increased their position in the stock. EOG Resources Inc (NYSE:EOG)’s revenue grew by about 40% in Q2 2013 versus a year earlier, with net income climbing over 60%.
Taking the tenth place on our list of hedge funds’ favorite energy stocks is Tesoro Corporation (NYSE:TSO), another oil and gas refining and marketing company. Tesoro Corporation (NYSE:TSO) is no exception to the low multiples of downstream with a forward P/E of 7; the company has been experiencing higher costs recently with negative impacts on profits.
Disclosure: I own no shares of any stocks mentioned in this article.