Few people have made more money in oil than T. Boone Pickens.
He started from nothing and built a multibillion-dollar oil empire.
Pickens was born in Oklahoma during the Great Depression. He mowed lawns until he was old enough to buy his first paper route at age 11.
The young Pickens started with 28 papers, which was the smallest route in town. But he quickly expanded to 156 by acquiring routes from other paper boys.
It’s a practice he perfected later in life…
Early in his career, Pickens traveled across Texas by car and shaved in gas station restrooms as he raised money from investors. He used the capital to buy land in the oil-rich Permian Basin…
He later became known as a corporate raider because of his numerous takeovers.
Pickens made billions of dollars for his investors and for himself through his BP Capital Fund… He once ranked as high as No. 207 on the Forbes 400 list of U.S. billionaires.
When T. Boone Pickens makes moves in the oil market, it pays to listen. Today, we’ll show you eight companies he’s adding to his portfolio, and tell you why you should follow his lead…
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Following the Smart Money
Regular readers know that we like to follow the “smart money.” One way we do this is by reading 13F reports.
All funds that have more than $100 million under management need to file a quarterly report with the U.S. Securities and Exchange Commission (SEC).
The SEC calls it a 13F filing. It requires large funds to disclose the stocks they own 45 days after every calendar quarter.
We’ve used this strategy to follow some of the world’s greatest investors, including David Tepper and Seth Klarman.
Recently, we dug through the report filed by Pickens’ fund—and there’s definitely a trend forming.
The oil tycoon is buying a special kind of company called a master limited partnership, or MLP.
(Due to ailing health, Pickens has closed his fund. He’s converted his holdings to a family office structure. But the fund still needs to file a 13F report.)
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Increased Demand Means Increased Profits
An MLP is a unique corporate structure that doesn’t pay taxes. The caveat is that the company must return at least 90% of profits to investors (who then pay taxes). This structure makes MLPs attractive to investors looking for high yields.
However, as we’ve written elsewhere, rising interest rates have hurt high-yielding investments. MLPs have been swept up in the mix.
But maybe T. Boone Pickens is telling us that now’s the time to get in…
Now, we don’t know why Pickens started buying MLPs. He’s been a lot less vocal since paring down his fund. But I imagine he’s seeing the same things we are.
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Let me explain…
Last month, we told you U.S. oil production is ramping up and that it would be good for frackers.
As we wrote then, U.S. frackers are pumping more oil than ever. But they can’t increase production because pipelines are at max capacity. New pipelines are in the works… But they take time to build.
Pipeline companies are aware of the shortage—and they’re capitalizing on the increased demand.
We’ll see pipeline companies charge higher transport fees. And when that news gets out, their shares will move higher. The fat yields they pay will just be a cherry on top.
If you want to follow a legendary oil speculator, here are the eight largest positions in his portfolio:
| Company | Ticker |
| Andeavor Logistics | ANDX |
| TC PipeLines | TCP |
| Enbridge Energy Partners | EEP |
| Kinder Morgan | KMI |
| EQT Midstream Partners | EQM |
| Shell Midstream Partners | SHLX |
| Targa Resources | TRGP |
| MPLX LP | MPLX |
The best oil investor of our generation has vetted these companies. So if you’re excited about the U.S. oil boom, I’d start my research with this list.
Regards,
Nick Rokke, CFA
Analyst, The Palm Beach Daily
CHART WATCH
Time to Profit From Shale Drillers
On February 14, we told you the best way to play the U.S. oil boom was to buy frackers (companies that drill oil from shale rock).
And we recommended the VanEck Vectors Unconventional Oil & Gas ETF (FRAK), which holds a basket of fracking companies. Since then, FRAK is up 23%.
If you followed our suggestion and bought FRAK, I’d consider taking some profits right now.
Usually after a strong move up, stocks take a little breather. I expect that to happen with FRAK before it takes another leg up later in the year.
—Nick Rokke
MAILBAG
From Franklin J.: My Palm Beach Research Group membership has been a blessing. As a senior-age member who discovered your group later in my financial life, I’ve certainly benefited from the hard work you have done to provide everyone with the tools necessary to make our future more secure and comfortable.
Nick’s Reply: We appreciate the note, Franklin. That’s our goal at PBRG—to help our readers and subscribers achieve a dignified and comfortable retirement. If you’re following our asset allocation model to build your own nest egg as Franklin has, share your story with us right here…
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