T. Boone Pickens' New ETF
T. Boone Pickens is a legend in the American energy industry. He has been labeled a ‘wildcatter’, a financier, a takeover operator, a real-life JR Ewing, and a corporate raider. His diversified career has spanned over 60 years and at the age of 89, he is still active.
Pickens started Petroleum Exploration, Inc with $2,500 in 1952. He also started Altair Oil and Gas to focus on exploration in Canada. In 1956 he merged the two companies into Mesa Petroleum, which he eventually grew into the biggest independent oil and gas company in America.
In 1969 he launched his first hostile takeover in a bid to acquire Hugoton Production company along with its enormous gas field. He did this by making an offer to Hugoton shareholders using newly issued stock in Mesa. This type of offer became popular in the 1980s but was virtually unheard of at the time.
Then in 1997, at the age of 70, Pickens started hedge fund BP Capital Management which primarily invests in energy companies. In January, however, Pickens announced that BP Capital would become a family office due to a number of strokes he suffered in 2017.
While Pickens' career winds down after nearly 20 years in the investment management industry, a new ETF in his name is just beginning. The newly created Pickens Oil Response ETF will trade on the NYSE under the ticker symbol BOON in the coming days. It will track the NYSE Pickens Oil Response Index, which was developed last year by some of Mr. Pickens’ lieutenants. Interestingly, this was the first time a stock index was branded with a singular individual.
To celebrate the new ETF, I reviewed Pickens' stocks as reported in BP Capital's recent Form 13F SEC filing to find his most undervalued holdings.
BP Capital's Latest Form 13F Filing
On February 13th, T Boone Pickens' firm BP Capital filed its quarterly Form 13F regulatory filing. I reviewed the filing to gain a glimpse into the firm's portfolio.
BP Capital's stock portfolio totals $277 million according to the latest filing. The list value of stock holdings is up 19.5% when compared to the last quarter. As a benchmark, the S&P 500 was up 6.1% over the same period. Not bad!
The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below at the BP Capital page. The following table summarizes the firm's largest holdings reported in the last filing:
| Ticker | Name | Holding ($mil) | % Of Portfolio |
|---|---|---|---|
| NYSE:EPD | Enterprise Products Partners L.P. | $14.2 | 5.1% |
| NYSE:WPZ | Williams Partners LP | $12.1 | 4.4% |
| NYSE:PSXP | Phillips 66 Partners LP | $11.5 | 4.1% |
| NYSE:AMGP | Antero Midstream GP LP | $9.9 | 3.6% |
| MPLX | MPLX LP | $9.2 | 3.3% |
| NYSE:ETP | Energy Transfer Partners LP | $8.7 | 3.1% |
| NYSE:TRGP | Targa Resources Corp | $8.2 | 3.0% |
The seven positions above represent 26.6% of the fund's total portfolio.
BP Capital's Most Undervalued Holdings
To determine which stocks are trading below their intrinsic value, aka "fair value" I used the finbox.io Fair Value estimates. I also wanted to blend in some indication of which stocks might be ready to make a move up soon because they're popular with Wall Street analysts.
I calculated an average using the finbox.io fair value upside and analyst upside to create a blended upside which I then used to rank the most undervalued holdings.
Here are the top 7 stocks based on my calculations:
| Ticker | Name | Upside (finbox.io) | Upside (Analyst Target) | Blend Upside |
|---|---|---|---|---|
| NYSE:RRC | Range Resources Corp. | 21.3% | 74.0% | 47.7% |
| NYSE:OAS | Oasis Petroleum Inc. | 27.0% | 59.9% | 43.4% |
| NYSE:AA | Alcoa Corp | 37.2% | 38.0% | 37.6% |
| NYSE:FET | Forum Energy Technologies Inc | 35.1% | 37.9% | 36.5% |
| NYSE:SLCA | U.S. Silica Holdings Inc | 23.0% | 49.6% | 36.3% |
| NYSE:PE | Parsley Energy Inc | 12.1% | 49.2% | 30.6% |
| ETP | Energy Transfer Partners LP | 23.8% | 34.1% | 28.9% |
T. Boone Pickens' 7 Most Undervalued Stocks: Range Resources Corp
Range Resources Corp (NYSE: RRC) operates as an independent natural gas, natural gas liquids (NGLs), and oil company.
Source: finbox.io
Shares of the company are down -28.2% over the last three months. The stock last traded at $13.86 as of Thursday March 1st and seven separate valuation analyses imply that there is 21.3% upside relative to its current trading price.
T. Boone Pickens' 7 Most Undervalued Stocks: Oasis Petroleum
Oasis Petroleum (NYSE: OAS) is an independent exploration and production company that focuses on the acquisition and development of unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin.
Source: finbox.io
Shares of Oasis Petroleum are down -24.7% over the last three months and finbox.io's fair value estimate of $10.14 per share calculated from five cash flow models imply 27.0% upside. The average price target from 31 Wall Street analysts of $12.64 per share implies even more upside.
T. Boone Pickens' 7 Most Undervalued Stocks: Alcoa Corporation
Alcoa Corporation (NYSE: AA) produces and sells bauxite, alumina, and aluminum products.
Source: finbox.io
Alcoa Corporation's stock currently trades at $45.16 per share as of Thursday March 1st, up 8.0% over the last three months. However, finbox.io's five valuation analyses suggest that shares could increase 37.2% going forward.
T. Boone Pickens' 7 Most Undervalued Stocks: Forum Energy Technologies
Forum Energy Technologies (NYSE: FET) manufactures and distributes products to the oil and natural gas industry in the United States and internationally.
Source: finbox.io
Shares of the company are trading -24.2% lower over the prior three months. But the stock price could end up trading 35.1% higher in 2018 based on Forum Energy Technologies' future cash flow projections.
T. Boone Pickens' 7 Most Undervalued Stocks: U.S. Silica
U.S. Silica (NYSE: SLCA) produces and sells commercial silica in the United States.
Source: finbox.io
U.S. Silica's stock currently trades at $26.72 per share as of Thursday, down -23.7% over the last three months. On a fundamental basis, the company's stock is trading at a 23.0% discount to finbox.io's intrinsic value estimate.
T. Boone Pickens' 7 Most Undervalued Stocks: Parsley Energy
Parsley Energy (NYSE: PE) is an independent oil and natural gas company that engages in the acquisition, development, production, exploration, and sale of crude oil and natural gas properties in the Permian Basin in West Texas and Southeastern New Mexico.
Source: finbox.io
Shares of the company are down -7.9% over the last three months. The stock last traded at $25.47 as of March 1st and six separate valuation analyses imply that there is 12.1% upside relative to its current trading price.
T. Boone Pickens' 7 Most Undervalued Stocks: Energy Transfer Partners
Energy Transfer Partners (NYSE: ETP) engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States.
Source: finbox.io
Shares of Energy Transfer Partners are up 10.2% over the last three months and finbox.io's fair value estimate of $22.51 per share calculated from seven cash flow models imply 23.8% upside. The average price target from 20 Wall Street analysts of $24.15 per share implies further upside.
Managers with more than $100 million in qualifying assets under management are required to disclose their holdings to the SEC each quarter via 13F filings. Qualifying assets include long positions in U.S. equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. It is important to note that these filings are due 45 days after the quarter end date. Therefore, BP Capital's holdings above represent positions held as of December 31st and not necessarily reflective of the fund's current stock holdings.
However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.
Author: Andy Pai
Expertise: financial modeling, mergers & acquisitions
Andy is also a founder at finbox.io, where he's focused on building tools that make it faster and easier for investors to do investment research. Andy's background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:
- Sears Holdings Corp.'s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
- Cerberus Capital Management's $3.3 bn acquisition of SUPERVALU Inc.'s New Albertsons, Inc. assets.
Andy can be reached at [email protected].
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.
