As investors, we love to see what stocks billionaires are buying. With their great wealth, we assume that there is great insight to be had by peering into the newest positions in their portfolios. One such investor, George Soros, added several energy investments during the latest quarter according to his latest From 13F filing. What caught my eye was the $88.4 million invested into five of those energy companies. Let's drill down on these latest energy investments and see what insights we can gain.
Ultra Petroleum (NYSE: UPL)
The billionaire bought $22.5 million worth of the low-cost natural gas producer in the quarter. Over the past year, Ultra has undergone a significant change, becoming much more disciplined in allocating its capital. It has done so by cutting its capital spending from $1.56 billion in 2011 to just $415 million this year which aligns it with current cash flow. That discipline should still deliver solid returns as the company projects that it can grow its production by 42% while doubling its EBITDA by 2016. There's further upside thanks to its leverage to the price of natural gas, as Ultra will benefit as the price rises, which makes it a big winner as we begin to export gas. By investing in Ultra, Soros is making the bet that natural gas prices are going higher.
Soros invested $8.4 million in Apache during the quarter, as the billionaire was probably drawn to its cheap valuation. The company has a diverse asset base that includes some intriguing international assets. Apache also has a long-term track record of steady growth, as its production has grown at a compound annual rate of 12% over the past 20 years while cash flow and adjusted earnings per share have grown by a compound annual rate in the high teens over the past decade.
While the past performance is nice, Soros probably has his eye on the future. Apache is in the process of optimizing its portfolio, which includes jettisoning about $4 billion worth of assets while whittling away about $2 billion from its debt and buying back up to 30 million shares. Here Soros probably sees an opportunity to invest in a solid company that's repositioning to pursue its most profitable growth opportunities, which should unlock value in the company's shares.
C&J Energy Services (NYSE: CJES)
One of the more interesting purchases this quarter is the $7.4 million Soros poured into C&J Energy Services. The oilfield service company specializes in complex well completions, making it an important company for extracting ever-harder-to-reach oil and gas. With operations spanning the most active shale plays, an investment in C&J is one that benefits as oil and gas companies drill more wells using even more complex hydraulic fracturing techniques.
Cameron (NYSE: CAM)
By investing $6.5 million in Cameron, Soros is picking up an oilfield equipment maker that provides products and services to both the onshore and offshore markets. Where Cameron really shines is in the growing subsea systems and offshore market, which have both benefited higher oil prices. As oil prices worldwide have remained above $100 for the past few years, it has enticed oil producers to invest billions to grow production offshore. That trend shows no signs of slowing down.
Cheniere Energy (NYSEMKT:LNG)
The final new energy investment that we will look at is Soros' $6.5 million investment in Cheniere. The reason for this purchase is quite obvious: Soros sees a big future for exporting natural gas. While Cheniere is no longer the only company approved to export gas to a country that doesn't have free trade agreement with the U.S, it is the first mover in the space. Further, in addition to its already approved Sabine Pass facility, the company has a second potential facility in the works in Corpus Christi, Texas.
Final Foolish thoughts
When you look at these five companies there are two interesting takeaways:
- Each could be considered as an "against the grain" investment.
- There is tremendous focus, yet diversity.
Neither Ultra or Apache is a "hot stock" right now, while fracking and natural gas exports are both pretty hotly debated subjects. Further, each company has something it does very well, yet none is a one-trick pony. So if you want to invest like a billionaire, the process is almost as important as the stocks. In this case, Soros is looking for focused companies that aren't what everyone else is buying these days.