The combination of GlobalSantaFe (GSF) and Transocean (RIG) - Get Report underlines what I've said in a few articles in the past: T. Boone Pickens knows what he's doing, and he's worth paying attention to.
GlobalSantaFe is up $5.50 so far this morning and Transocean is up more than $7. At Stockpickr we keep track of the investor's top holdings with the
GlobalSantaFe is Pickens' third-largest holding. In the quarter ending Dec. 31, 2006, he bought 524,359 shares of the company, bringing his total to 1.35 million shares. GlobalSantaFe provides offshore drilling services to the oil and gas industry and operates a fleet of rigs in the Gulf of Mexico, the North Sea, West Africa and the Middle East.
When oil was near $50 earlier this year, Pickens said it would hit bottom and rise. It did, and shares of GlobalSantaFe followed. The stock appears to have higher to run. Analysts are projecting the company will earn $7.17 a share this year and $9.16 next year, up from $3.77 in 2006, putting GSF's forward
price-to-earnings ratio at around 7.
With operating earnings exceeding $1 billion and net debt of just $220 million, GlobalSantaFe makes an excellent takeover target. In a recent analyst note, Citigroup characterized GlobalSantaFe as a likely takeover candidate. Super hedge fund investor
, whose holdings also can be found at Stockpickr, is a shareholder of GlobalSantaFe as well.
Another stock to watch in the
Suncor is Pickens' largest holding, with $139 million invested as of the last regulatory filing. Suncor's two main segments are oil sands -- the recovery of oil from places where it's typically more expensive to extract oil, such as the tar sands of Canada -- and natural gas. Suncor acquires, develops and produces natural gas from reserves in western Canada.
Suncor trades at 10 times cash flows, yet the full potential of this company is unknown. If and when oil hits $80 a barrel, oil companies will have to increasingly look toward natural gas reserves and the Canadian tar sands for oil. Pickens is making a huge bet that this is the future of energy production.
Pickens also looks for alternatives to oil, given that users of oil will have to look for different sources of fuel if oil prices continue on higher than $80. With that in mind, a speculative small-cap play for Pickens is
, a company that manufactures railcars for the transportation of everything from grain and solid waste to pressurized tank cars for transporting liquid petroleum gas, light oil and ethanol. As we become more dependent on fuel sources that cannot be transported via pipeline -- ethanol for instance -- Greenbrier should enjoy greater demand.
Pickens' portfolio can be thought of as a "peak oil index." He is invested in every aspect of the oil business and its alternatives. With the success of Transocean and GlobalSantaFe, it might pay to check out the other stocks in
, as well as more than a dozen others.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for
The Financial Times
and the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
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