Billionaire Druckenmiller’s Energy Stock Picks

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We have already gone through billionaire Stanley Druckenmiller’s 13F filing for the third quarter of 2012. Even though investors can’t buy all of these stocks, we still think that it can be useful to use these picks as free ideas that can be researched further- or not- as an investor wishes. Our database of filings also allows us to narrow our focus to specific sectors, industries, and valuation categories, and the same logic applies there. See the full list of stocks from Druckenmiller’s 13F or read on for our quick take on the five largest energy holdings in his portfolio:

Druckenmiller initiated a position of 1.3 million shares in ExxonMobil (NYSE: XOM), making the supermajor of all supermajors the largest holding in his 13F portfolio. ExxonMobil currently has a market capitalization of just over $400 billion, which places its valuation at 11 times consensus earnings for 2013. That multiple also reflects an expected decline in net income next year. ExxonMobil made our list of the ten most popular energy stocks for the third quarter (see the full rankings). In the third quarter revenue and earnings at the company were down 7-8%, but we’d consider it as a long term value stock as long as an investor can handle the exposure to oil and gas prices.

Another new addition to the portfolio was Chevron (NYSE: CVX), another large oil and gas company. Its market cap is about half of Exxon Mobil’s. Chevron also experienced a decline in revenue and earnings last quarter versus a year earlier, though the drop was steeper there: net income, for example, fell by about a third. However, the market gives Chevron an appropriate discount to its larger peer and the trailing and forward P/E multiples both come in at 9. Billionaire Ken Fisher’s Fisher Asset Management added heavily to its position in Chevron last quarter and we think that it is worth considering as well.

Offshore drilling contractor Noble (NYSE: NE) was another energy pick. Noble had a 15% decline in net income in the third quarter compared to the same period in 2011, despite rising revenue, but Wall Street analysts apparently think that the company will bounce back. The current market cap of $8.6 billion represents 17 times the company’s trailing earnings, but only 8 times expectations for 2013. Point State Capital- which is managed by several former portfolio managers at Druckenmiller’s Duquesne Capital- was another buyer of the stock last quarter.

Druckenmiller reported owning 2.7 million shares of Cheniere Energy (NYSEMKT: LNG), which primarily operates terminals for liquefied natural gas. It is unprofitable on a trailing basis, and expected to be unprofitable next year as well, but liquefied natural gas is seen as an attractive investment opportunity given its prospects as a fuel source (including as an export). Billionaire George Soros increased his own holdings to nearly 4.6 million shares by the end of September (see Soros's favorite stocks). We think that we would prefer to wait until the company is actually looking at breaking into the black.

Halliburton (NYSE: HAL) was yet another energy stock that Druckenmiller hadn’t owned at the beginning of July but had decided to buy by the end of the quarter, at which point he owned 1.1 million shares. The energy services company trades at 11 times earnings, whether we consider historical financials or expectations for next year, and the five-year PEG ratio is 0.6 as the sell-side expects moderate growth over the next several years. Net income has been down, but we think that it and its larger peer Schlumberger merit further research. Omega Advisors, which is run by billionaire Leon Cooperman, increased its own stake by 26% last quarter (here are more of Cooperman's stock picks).


InsiderMonkey has no positions in the stocks mentioned above. The Motley Fool owns shares of Halliburton Company and ExxonMobil. Motley Fool newsletter services recommend Chevron and Halliburton Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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