Astenbeck Capital Management, which is 80% owned by manager Andrew Hall, focuses almost entirely on energy and other basic materials stocks. The fund recently filed its 13F for the third quarter of 2012, disclosing many of the long equity positions that it owned at the end of September, and while investors shouldn't blindly copy any manager's holdings, we believe that they are a good starting point to find stocks worthy of further research. In this case, Astenbeck's two favorite stocks were both energy companies. Read on for a brief analysis of Statoil (STO) and Total SA (TOT) and see what stocks the fund has liked in the past.
Astenbeck reported owning 2.4 million shares of Statoil. That company's $76 billion market cap places it at only 8x consensus earnings for 2013, a fairly cheap price compared to many large oil companies. Statoil is also notable in that it recently purchased Brigham Exploration and Production, a Bakken Shale-focused oil company, and so has a sizable position in one of the hottest shale plays in the onshore U.S. In the third quarter of 2012, Statoil reported revenue about flat from a year earlier but a 38% increase in earnings. This runs in contrast to many other oil companies whose net income was down. Statoil also pays a dividend yield in the 3% range, though investors should note that it is not a constant payment, but rather one that changes from year to year.
Total is an even higher-yielding oil company (though U.S. investors wouldn't see a constant dividend payment) that has been holding up relatively well recently: Its most recent quarterly report showed an 8% decline in net income off of a rise in sales. Total carries trailing and forward price-to-earnings multiples of 8 and 7, respectively. The fund owned 1.1 million shares of Total at the end of September; filings from the end of June show that Charles de Vaulx's International Value Advisers had owned 5.9 million shares at that time (find more stocks owned by International Value Advisers).
It's interesting that the fund opted for these less widely held oil majors; it did report positions in Exxon Mobil (XOM), BP (BP) and Chevron (CVX) as well, though those stakes were considerably smaller. We had put BP and Exxon Mobil on our list of five energy stocks for long-term investors. There's a considerable spread among these three stocks in terms of their forward PE multiples: BP's is 6, Chevron's is 9, and Exxon Mobil's is 11. So we see that all five companies look fairly cheap, although they all face considerable risk in terms of oil prices. BP, in quantitative terms, looks like the best value. Sentiment is running against the company and it may be hit by further costs related to the Deepwater Horizon disaster. It also pays a high dividend yield, and its asset sales intended to raise cash are going well, so we think it's about as good a value as Astenbeck's top picks.
Exxon Mobil saw moderate declines in both revenue and earnings last quarter compared to the third quarter of 2011, and it trades at a premium to these peers in the oil industry, but it has a strong position in natural gas and is a major market leader in the space. We can see why an investor who is more of an absolutist on value might prefer a stock with lower multiples, but we'd say that it merits at least some premium over the other companies we've discussed. Chevron's forward PE of 9 matches where it trades in terms of trailing earnings, as analysts expect little growth here. Its earnings came in about a third lower in its most recent quarter than in the same period in the previous year, however, and the fact that this decline was so much greater than at BP or Exxon Mobil had contributed to us keeping it off our list of recommendations. At that valuation, we wouldn't be short the stock but we don't think that it's as exciting a buy in the energy sector.
We would say that BP and Exxon Mobil are at least as good investments as Statoil and Total; however, Astenbeck's top picks are still cheap oil majors and it's worthwhile to consider them as options when picking out energy stocks for an investor's portfolio.