Last week we heard from three top billionaire investors, publicly, and for different reasons. In all cases, they gave us some valuable nuggets.
On Friday, Bill Ackman held a conference call defending his multi-billion dollar position in Valeant. In the face of the scrutiny, he predicted Valeant shares would trade $448 in three years — a quadruple from recent prices.
Dan Loeb wrote released his quarterly investment letter last week describing his weak performance for the year and the challenging investment climate, yet expressing his high conviction for two stocks (a good read and good game plan outlined): Baxter International and Seven & i Holdings.
And billionaire David Tepper, who famously coined the Bernanke put and sparked a broad stock market rally back in 2010, said on Friday that he thinks China needs to ease more and faster, and that could set up for a situation where the Fed has to tighten quicker and more aggressively. He likes GM as way to lever the U.S. economy. He also said he has added to HCA Holdings.
Today, at the DealBook Conference, we heard from two other influential and legendary billionaire investors, Carl Icahn and Stanley Druckenmiller. Druckenmiller said he is short euros. He thinks the currency move underway will last for years, not months. He is long Amazon and is short “a bunch of value companies that buy back stock and need cyclical growth.” He used IBM as an example of one of those companies (owned by Warren Buffett).
Icahn weighed in on the controversial Valeant (sort of), implying he was involved but not saying whether it was from the long or short side. Rather than talk specifics on stocks, he dropped some interesting perspectives on investing and his success. He admitted he wasn’t a brilliant stock picker, nor does he think anyone is. He’s in the business of finding problems and fixing them. He has famously said he makes money “studying natural stupidity.” Today he added that he’s made so much money over his career because there are people running companies that are in over their heads and have bad incentives, he makes money holding these people accountable.
What about the weak spots in his portfolio? He says “activists get caught in cycles, you need staying power, ability to buy more when they drop.”
Full disclosure, at BillionairesPortfolio.com, our subscription-based premium online portfolio service, we own Transocean (RIG) and Freeport McMoran (FCX), piggybacking Stanley Druckenmiller and Carl Icahn’s investments.
Most energy stocks are trading at historical lows, and many have been priced like stocks in the pipeline for bankruptcy. Even valuations on the major oil companies are trading at a 35-year low relative to the broader market. And it all has to do with the weakness in the price of oil.
But that may be changing, and very soon.
The self-made billionaire energy trader, Boone Pickens, has recently called for $70 by year-end. If he misses, he says it will be because oil is “over $70, not under $70.” He’s not the only oil bull. Another famous and very wealthy energy trader has called a bottom in oil too, and is looking for much higher prices. 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.
Hall now runs a $3 billion energy hedge fund, Astenbeck Capital Management. He’s made fortunes pegging bottoms in tops in oil over the past 15 years, and he’s expecting a big bounce back in oil. In a recent letter to investors, he laid out an extensive fundamental case for higher oil prices and suggested a cut from OPEC could be coming as well. On that front, he noted that merely a hint of an OPEC policy change in August of 1986 spiked oil prices by 50% in just 24-hours.
So we have two of the greatest and wealthiest oil traders in the world that are long oil and have called for a return to much 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 energy stocks on this bounce. Warren Buffett has famously said a simple rule dictates his buying: “Be fearful when others are greedy, and be greedy when others are fearful.”
This statement shows the mindset of great investors and how they react when markets fall. Instead of running in fear, great investors welcome market corrections as opportunities to buy on the cheap. You don’t get rich buying into a high market or selling into a falling market. You can get rich though, buying into market corrections and beaten-down markets.
At Billionairesportfolio.com we love opportunities like those presented in the energy sector right now. But, we like to have the added protection of investing alongside a billionaire investor that has a lot of money at stake, and the power to influence change.
In this case, not only does billionaire oil magnate Boone Pickens have his money where his mouth is on his oil call, but each of the five energy stocks below are owned by at least one of the world’s great billionaire investors, and each has the potential to double (or more) if Pickens is right about oil at $70 by year-end:
1) SandRidge Energy (SD) – Billionaire investor Prem Watsa owns almost 11% of SandRidge. This stock traded above $4 last November, when oil was $70. That’s 788% higher than its current share price today.
2) Oasis Petroleum (OAS) – Billionaire hedge fund manager John Paulson owns nearly 7% of this stock. Additionally, SPO Advisory, a $7 billion activist hedge fund, owns almost 15% and has been buying the stock on almost every dip. When oil was last $70, OAS was trading $25, or 150 % higher than current levels.
3) Whiting Petroleum (WLL) – Billionaires John Paulson and Andreas Halvorsen, of the hedge fund Viking Global, own a combined 10% of WLL. And the company has officially put itself up for sale! This stock traded at $52 when oil was last at $70. That would be a 205% return from its share price today.
4) Chesapeake Energy (CHK) – Billionaire investor Carl Icahn owns 11% of CHK and recently added to his position around $13. Chesapeake has halted their dividend and said they are looking at selling assets, all of which is bullish for the stock. The last time oil was $70, Chesapeake was $25. That would be a 203% return from its price today.
5) Transocean Energy (RIG) – Billionaire Carl Icahn also owns almost 6% of Transocean. RIG recently reported better than expected earnings this month. The last time oil was $70 Transocean was $24 or almost a 50% return from its share price today.
At Billionairesportfolio.com, we follow the “best ideas” of the world’s top billionaire investors. You don’t have to be rich to take part. You don’t have to pay the hefty 2% management fee and 20% profit share to a hedge fund. You can follow the lead of powerful billionaire investors by simply buying the same stocks they do, in your own brokerage account.
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