Last month, we penned a piece at Billionairesportfolio.com titled Five Stocks With Triple-Digit Potential If Boone Pickens Is Right About $80 Oil.
That article was read by almost 200,000 people. Oil proceeded to bounce by 20% over the next two weeks. And the five stocks we mentioned in the article went up an average of 50% in the following three weeks.
Now that we have seen oil pull back again, I want to revisit this analysis and talk about some further support for a bottom in oil here.
In our piece last month, we told you that Boone Pickens, a self-made billionaire energy trader, had predicted oil will hit $75 to $80 by the end of 2015.
Now there is another famous and very wealthy energy trader calling a bottom and a return to higher prices for the world’s most traded commodity. His name is Andy Hall.
Hall was a Citigroup oil trader who made billions of dollars for the bank energy trading arm, Phibro, in the early-to-mid-2000’s. He was one of the first energy traders to load up on oil futures in 2002, when oil was sub-$30, on the thesis that a boom in demand was coming from China.
Hall reportedly made $800 million in profits for Citigroup in 2005 from his original bullish energy bet. He then made over $1 billion in 2008 for the bank, as oil prices soared to $147 a barrel and then abruptly crashed. Hall profited handsomely from both sides of the trade and earned over $100 million for himself that year.
Now, Andy Hall runs a $3.2 billion energy hedge fund, Astenbeck Capital Management. In his recently published letter to investors, Hall -- who has made fortunes pegging bottoms in tops in oil over the past 15 years -- is calling the bottom in oil.
He thinks the chances of seeing new lows in oil here are “relatively small.” And he says a return to higher prices may come “more quickly than many expect.”
So we have two of the greatest and wealthiest oil traders in the world going long oil and calling for a return to higher prices sooner rather than later.
If they are right about the future direction of oil, there will be a lot of money to be made in this bounce. You could buy oil futures or leveraged oil ETFs to play it. But at BillionairesPortfolio.com, we think the biggest returns on an oil bounce will come from select, deeply undervalued stocks in the energy sector. And we like the stocks that have the added benefit of a large activist shareholder. These investors can use their influence to force these oil companies to create instant shareholder value by selling the entire company or selling portions of the company’s assets.
Below are five deeply undervalued oil stocks, each with a large influential investor involved:
1) Penn Virginia (PVA) - Billionaire George Soros owns 8% of this company, and has officially forced the company to put itself up for sale. Just a couple of weeks ago Penn Virginia announced that they hired Bank of America to explore a sale of the company. Based on recent energy M&A multiples, Penn Virginia could fetch as much as $15 a share. That’s more than double its current share price.
2) Oasis Petroleum (OAS) - The $7 billion activist hedge fund, SPO Advisory, run by the concentrated value investor John Sculley, now owns 15% of OAS and has been buying the stock on almost every dip. Billionaire hedge fund manager John Paulson also owns nearly 9% of this stock. When oil was last $75 to $80, OAS was trading $30.74 or 150% higher than current levels.
3) Whiting Petroleum (WLL) - Billionaire hedge fund manager John Paulson owns 8% of WLL. Whiting, just like Penn Virginia, recently announced that it has put itself up for sale. As of last week there were at least a dozen energy companies interested in Whiting, one of the biggest shale producers in the US. The potential suitors include Exxon Mobil, Hess, Continental Resources and Statoil to name some of the biggest. Just this past November, when oil was last trading around $80, Whiting was $60 a share. That’s more than 60% higher than its current share price.
4) Chesapeake Energy (CHK) - Billionaire activist Carl Icahn owns 10% of this company and has forced management to clean up its company balance sheet over the past couple of years. The company now has more than $4 billion dollars in cash, worth nearly half of its $9 billion market cap. And it has authorized a billion dollar stock buyback. The company sells for just two thirds of its book value and has a 2.5% dividend. It was trading around $22 bucks when oil was at $80 last November.
5) Energy XXI (EXXI) - Mount Kellett, a top $5 billion dollar hedge fund that specializes in deep value and distressed investing, owns 6% of this stock. Energy XXI has a book value of $16 a share, but only sells for $3.12. It sold for $8 the last time oil was trading $75. That’s 156% higher than current levels.
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Five Stocks with Triple-Digit Potential If Boone Pickens Is Right About $80 Oil