Billionaire Hedge Fund Manager Reveals Latest Picks $CVX $XOM
When one of the greatest hedge fund managers of all times makes a change in his portfolio its worth taking notice. With a focus on dividends its no surprise why he chose the way he did. If you are looking for a change in direction for your investments your not the only one.
Billionaire Stanley Druckenmiller is one of the most renowned hedge fund managers of all time. His macro hedge fund, Duquesne Capital, which was shut down in 2010, was one of the most successful in the hedge fund industry, returning on average 30% per year, net of fees. At the time of closing, Duquesne Capital managed $12 billion in assets. Druckenmiller initially gained his reputation as a manager at George Soros’ Quantum Fund, where he had earned more than $1 billion in a day on a short position that benefited from a forced devaluation of the U.K. pound. Today, with net worth of $2.7 billion, Druckenmiller runs a family office that manages some of his wealth.
The latest picks in Druckenmiller’s portfolio have been revealed in his fund’s most recent 13F filing with the Securities and Exchange Commission. He initiated new positions in U.S. energy giants, Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX), which, respectively, now represent his first and fourth largest holdings. Here is a closer look at Druckenmiller’s five new picks that are paying attractive dividends.
Exxon Mobil Corporation is the single largest position in Druckenmiller’s third-quarter portfolio, worth more than $123 million at the end of the quarter. Exxon Mobil is the world’s largest integrated oil and natural gas company, with a market capitalization of $396 billion. The company is also the biggest dividend payer in the world. The energy behemoth pays a dividend yield of 2.6% on a payout ratio of 24%. Its competitors Chevron, ConocoPhillips (COP), and BP Plc (BP) pay dividend yields of 3.5%, 4.8%, and 5.4%, respectively. Over the past five years, Exxon Mobil’s EPS and dividends grew at average annual rates of 5.0% and 9.7%, respectively. The company’s 5-year CAGR is forecast at 6.3%. The company is likely to benefit from higher oil output and prices, as it boosts oil exploration and production from shale formations in North America. It is also going to benefit from a rebound in natural gas prices, given that, due to recent acquisitions, Exxon Mobil is more leveraged than its biggest competitors toward natural gas. The company is also more reliant on low-margin refining revenues than its competitors. The company has a very solid financial position and provides a total return on equity of 27%. Exxon Mobil has a forward P/E of 11.1, trading at a premium to its respective industry (with a forward P/E of 8.9, on average) and 8.6 for its rival Chevron. The stock is up 11.8% over the past 12 months. Billionaire Ken Fisher is also bullish about Exxon Mobil.
Chevron is another energy titan in Druckenmiller’s portfolio. His stake in this company is currently valued at $88.4 billion. Chevron is a $200-billion integrated oil and natural gas company. It is generally a good growth and income stock. The company pays a dividend yield of 3.5% on a payout ratio of 30%. Its competitor Exxon Mobil pays a lower dividend yield, while its smaller rival ConocoPhillips pays a higher yield. Over the past five years, the company’s EPS and dividends expanded at average annual rates of 11.5% and 9.2%, respectively. The 5-year CAGR is forecast to be flat. The company is cash rich, boasting as much as $21 billion in cash and equivalents. It is likely to use some of the cash for productive asset acquisitions, in line with the recent purchase of 246,000 net acres, including 7,000 Boe/d of current net production, in the Delaware Basin in New Mexico from Chesapeake Energy (CHK). Still, it should be noted that Chevron is committed to maintaining high liquidity so as to be able to mitigate volatile crude oil prices and possible cost overruns at its development projects. Dividend boosts are likely to be sustained in the future. The company is heavily weighted toward oil production, hence the drop in oil prices in the third quarter weighed heavily on the company’s financial performance. However, this dependence on oil prices could bode well for Chevron in the future, in case the global economies rebound, increasing the demand for oil. As regards its valuation, Chevron’s stock has a forward P/E of 8.6, trading at a discount to its respective industry and its rival Exxon Mobil. The stock is up 5.6% over the past year. Billionaires Ken Fisher and Cliff Asness are also big fans of Chevron.
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