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.
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 (NYSE: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 (NYSE: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 (NYSE: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 (NYSE: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 (NYSE: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.
The insider behind the Billionaire’s Portfolio is William Meade. William started his career with Wood Asset Management. Wood Asset Management was a $1.5 billion dollar institutional asset management firm and hedge fund, founded by Gary Wood, a former Goldman Sachs Partner and Harvard MBA. At Wood, William helped manage equity and fixed income portfolios for major university endowments, Fortune 500 pension funds and super high net worth clients (including 2 billionaire families).
Next, William was Director of ETF and Mutual Fund Research for Zacks Investment Research in Chicago. At Zacks, he worked with the founder Len Zacks, a PHD from MIT, in developing and maintaining a proprietary model that ranked over 20,000 ETFs and mutual funds. This model was viewed and used by over 150,000 people monthly, and was published in US News and World Report, and featured on CNN, Yahoo Finance, and Fortune.com.
William received a Masters in Economics from Johns Hopkins University, including PhD level coursework in International Economics. At Johns Hopkins, Mr. Meade was taught by Economists from The Federal Reserve and Department of Treasury. While at Johns Hopkins Mr.Meade consulted for a top hedge fund in Washington DC.