Wednesday, May 6, 2009

George Soros Hearts Oil and Gas (COP; HES; PBR; PXP)

Last November we had "George Soros: Green Schmeen, I'm Buying Arch Coal (ACI)". He is continuing his carbon forays. From Barron's:

Soros Buys 5.4% of Plains Exploration
Soros Fund Management bought 6.5 million shares of the energy explorer.

FORMER HIGHFLYER Plains Exploration & Production (ticker: PXP) is one stock that has run out of gas as energy prices pulled back. However, the oil and natural-gas exploration company has a new investor in billionaire George Soros who has scooped up nearly 6.5 million of the downtrodden shares in 2009.

On May 4 Soros's fund, Soros Fund Management, disclosed it now owns 6,467,400 million shares, or a 5.4% stake in the Houston-based Plains Exploration. Soros' hedge fund did not show any stock holdings as of Dec. 31, 2008, meaning the shares were purchased at some point in the last four months.

Soros Fund Management has registered as a passive investor in the company.

Plains Exploration did not return phone calls seeking comment.

A spokesman for Soros Fund Management declined to comment on the stake.

Soros's investment comes as the shares hover not far above their March 6 five-year low of $15.25. That's a fraction of the shares' all-time high of $79.86 last June, during the height of high gas prices....MORE

From GuruFocus, April 29:

Top George Soros Holdings: Petrobras (PBR), Potash (POT), Best Buy(BBY), Hess Corp. (HES), and ConocoPhillips (COP)

...Heavy Oil and Commodity allocation lifted the performance of the portfolio.

Ticker 4Q08 Weighting 4Q08 Position Change Market Cap ($M)
PBR 29.44% 73.77% 142043
POT 14.18% 77.38% 24245.1
MER 8.81% New 0
BBY 8.73% 1637.81% 15660.8
HES 7.15% 95.49% 17961.7
COP 5.79% 100.44% 60245.8
Total 74.10%

The top six holdings as December 31, 2008 are: Petrobras (PBR), Potash Corp. (POT), Besides Merrill Lynch, Buy Co. Inc. (BBY), Hess Corp. (HES), and ConocoPhillips (COP). The top six companies share 74.10% of the total stock portfolio. Three of the top six are oil and gas companies. It is one of the most concentrated portfolios of all the Investment Gurus that GuruFocus tracks. With the exception of Merrill Lynch (MER), which become part of Bank of America (BAC) By good fortune or by careful calculation, the heavy bet has paid off so far this year.

1. Petrobras (PBR)

PBR is an integrated company operating in exploration, production, refining, retailing and transportation of petroleum and its byproducts in Brazil and abroad. PBR has a market cap of $142.04 billion; its shares is traded at around $32.43 with a P/E ratio of 0.3 and P/S ratio of 1.1. The dividend yield of PBR is 0.9%. Over the past 5 years, It had an annual average earning growth of 48% .

George Soros started to own PBR from 2006, when he reported he owned 120,000 shares. He has been a net buyer since then, and by December 31, 2008, he owned almost 37 million shares and PBR’s weighting in the portfolio is 29.44%.

Back in February, 2009, Lou Baseness of Investment U, there are five compelling reasons why PBR makes a good investment.
New discoveries Worldwide oil demand might be off. But it’s temporary. And even if demand miraculously plateaus (don’t count on it with gas below $2 per gallon), the world would still “need to replace one Saudi Arabia per three years,” according to Petrobras’ CEO. No other company is making bigger discoveries than Petrobras. In fact, the company’s recent finds could triple its reserves. And as we all know, the country with the oil is always in control.

Long-term focus With crude below $40 per barrel, most oil companies are cutting back on exploration and development. Not Petrobras. They plan to spend $174 billion by 2013, which ensures they’ll have plenty of products to sell when oil prices climb higher.

Low cost Management estimates it can be profitable on new projects, even if crude oil stays around $45 per barrel. Few - if any - other major oil producers can claim such a low hurdle rate. Basic economic principles govern here - the low cost provider of a commodity enjoys the most profits when prices rise. And share prices often go along for the ride, too.

Deep-water expertise All the easy-to-find crude oil is gone. But Petrobras is an expert in deep-water exploration. That’s a competitive advantage no other oil company can touch. And it should continue to help Petrobras add reserves at much lower costs than its peers.

Valuation Emerging markets took it on the chin - twice as hard as the United States - despite stronger underlying fundamentals. It’s pointless to argue whether or not it was deserved. What matters is many high-quality stocks got caught up in the downdraft and now trade at mouthwatering levels. Petrobras is no exception, trading for less than 10 times earnings.
The only drawback, is that from the beginning of the year, PBR stock price has appreciated about 40% from $24.5 to $34 per share.

2. Potash Corp. of Saskatchewan Inc. (POT)

Potash Corporation of Saskatchewan Inc. is the world's largest potash company, the third largest phoshate producer, and the second largest nitrogen producer in the world. Potash Corp. of Saskatchewan Inc. has a market cap of $24.25 billion; its shares were traded at around $82.12 with a P/E ratio of 7.9 and P/S ratio of 2.6. The dividend yield of Potash Corp. of Saskatchewan Inc. stocks is 0.5%. Potash Corp. of Saskatchewan Inc. had an annual average earning growth of 12.6% over the past 10 years.

George Soros started to buy into POT in 1Q07 with a very small position of 4 thousand shares. He stepped up the his pace of purchasing in 2Q08 and ended the quarter with 1.7 million shares. By the end of the 2008, he owned 5.9 million shares or 14.18%.

POT stock price is up 17% so far this year....MORE