Boone Pickens' BP Capital: Transocean (RIG) Still Top Holding (13F Filing) ~ market folly

Tuesday, September 8, 2009

Boone Pickens' BP Capital: Transocean (RIG) Still Top Holding (13F Filing)

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up is T. Boone Pickens' hedge fund, BP Capital Management. He runs an energy-centric set of funds out of Dallas, Texas and is a big advocate of Peak Oil Theory. On the positive side of things, he has landed himself on Forbes' billionaire list. Yet on the negative side of things, he also graced the list of top hedge fund manager losers of 2008.

To say Boone had a rough 2008 would be putting it lightly. His energy fund was down 98% and his equities fund down 64% in a year to forget for the energy maverick. That said, BP returned 300% in 2005 and so it looks like you better have a strong stomach to survive the volatility here. We say this of course because we got word that Boone was seeking investors for hedge funds back in July. He started trading the new portfolios back in February and was up 79% already.

We'll be watching Boone's funds closely now that he's been personally hurt by them so much. He obviously doesn't want to blow up (again). In our recent hedge fund news summary, we also saw that Boone was scaling back his wind energy projects too. Looks like tough times all around for our favorite resident energy maverick. At 20%, he is the largest investor in his funds and will live and die by them. And for that, we cannot criticize him. We love to see managers with a lot of 'skin in the game.'

The following were BP Capital's long equity, note, and options holdings as of June 30th, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
Forest Oil (FST)

Some Increased Positions (A few positions they already owned but added shares to)
Questar (STR): Increased by 40%
Cabot Oil & Gas (COG): Increased by 37.5%

Some Reduced Positions (Some positions they sold some shares of)
Transocean (RIG): Reduced by 27.8%

Removed Positions (Positions they sold out of completely)
Alpha Natural Resources (ANR)
Consol Energy (CNX)
Massey Energy (MEE)
Halliburton (HAL)
Schlumberger (SLB)
Foster Wheeler (FWLT)
Fluor (FLR)
Weatherford (WFT)
McMoran Exploration (MMR)

All of their long holdings by percentage of assets reported on the 13F filing *(see note below regarding calculations)

  1. Transocean (RIG): 28.23%
  2. Devon Energy (DVN): 15.93%
  3. Occidental Petroleum (OXY): 15.39%
  4. Suncor Energy (SU): 10.64%
  5. Cabot Oil & Gas (COG): 9.85%
  6. Questar (STR): 8.13%
  7. Chesapeake Energy (CHK): 4.64%
  8. Forest Oil (FST): 4.54%
  9. Anadarko Petroleum (APC): 2.65%

Boone Pickens has had a rough patch here over the past year, but we'll continue to check in on this energy maverick to see what he's up to. As you can see, he has quite a concentrated portfolio full of energy names with Transocean (RIG) as his top position by a wide margin even after he sold off almost a third of his stake. If you go back before his funds 'blew up,' you'll see that Boone held many of these exact energy names and has favored them over the longer-term. He is obviously a big bull on crude oil and natural gas long-term and has positioned his equity portfolio as such.

He started a brand new position in Forest Oil (FST) with 260,000 shares and then he boosted his Cabot stake by 37.5% and boosted his Questar position by 40%. In terms of partial sales, he only sold off some RIG and that's it. However, in terms of full sales, he sold completely out of a bevy of names listed above in the 'removed' paragraph. Other than that, the rest of his positions were flat on a quarter by quarter basis as he left them unchanged.

*Note regarding portfolio percentages: Assets from the collective holdings reported to the SEC via 13F filing were $85 million this quarter compared to $93 million last quarter. Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. In reality, the percentages are more watered down in their actual hedge fund portfolio. If you were to calculate percentage weightings in the actual hedge fund portfolio, they would obviously be different since you would divide position sizes by their total assets under management.

This is just one of the 40+ prominent funds that we'll be covering in our Q2 2009 hedge fund portfolio series. So far, we've already covered the holdings of Bill Ackman's Pershing Square Capital Management, David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Dan Loeb's Third Point LLC, and Stephen Mandel's Lone Pine Capital, George Soros (Soros Fund Management), Lee Ainslie's Maverick Capital, Philip Falcone's Harbinger Capital Partners, David Stemerman's Conatus Capital, Eric Mindich's Eton Park Capital, John Griffin's Blue Ridge Capital, and Thomas Steyer's Farallon Capital. Check back each day as we cover prominent hedge fund portfolios.

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