Stockpickr: Trade Like T. Boone Pickens

Given his belief in $100 oil, Pickens is looking for plays in energy alternatives. So he invests in several coal companies, including Massey Energy(MEE Quote) and Foundation Coal(FCL Quote).

Coal companies have largely been misunderstood by analysts in the past year. Many analysts look at the rising price of oil and coal, and then look at a coal company and say, "Well, it has all of this coal underground, so the stock should be worth X-dollars." However, that kind of logic doesn't take into account the fact that oil is required to get the coal out of the ground. So the cost of extracting the coal has become greater.

That said, it's worth taking a look at Massey Energy, which trades at just 7.7 times cash flows. Analysts expect the company's earnings to go from 25 cents a share in 2006 to $1.46 a share in 2007. Activist fund Third Point is also a shareholder in Massey Energy.

Pickens also owns ConocoPhillips(COP Quote), which trades at a price-to-earnings ratio of just 7 and 3.6 times cash flows. With a $132 billion market cap, it's probably unreasonable to expect ConocoPhillips to be acquired, but at these levels, there is a great margin of safety. And Pickens is not the only one who believes so. Looking at ConocoPhillips' page on Stockpickr, you can see the full list of quality hedge funds, mutual funds and other investors who own the stock.