#$wll

Yesterday's market rout left most investors feeling helpless -- hedge funds, included. Five names continue to batter them today. Symmetric.io looked at its index of high-hedge-fund-ownership names to assess which company-moves had the greatest impact on hedge fund managers. The Symmetric Hedge Fund Concentration index tracks a basket of companies in which hedge funds hold the highest percentage of the publicly traded equity. Market movement among these companies will disproportionately impact hedge fund investors, over and above other institutions. Whiting Petroleum Corp. (WLL)

Down 4.6% as of this morning

Key hedge fund owner: Caymus Capital Partners

Realogy Holdings Corp. (RLGY)

Down 3.99% as of this morning

Key hedge fund owner: Manor Road Capital Partners

The Goodyear Tire & Rubber Company (GT)

Down 2.6% as of this morning

Key hedge fund owner: Lonestar Capital Management

Restaurant Brands International Inc. (QSR)

Down 2.25% as of this morning

Key hedge fund owner: Pershing Square

Air Products and Chemicals, Inc. (APD)

Down 2.2% as of this morning

Key hedge fund owner: Pershing Square

The energy giant could use an acquisition to reduce its exposure to refining and chemicals.

by Claire Poole

Oil and gas giant Exxon Mobil Corp. (XOM) isn't having a good week.

On Tuesday, analysts at Tudor, Pickering, Holt & Co. Securities said they preferred the stocks of Royal Dutch Shell plc/BG Group plc and rival Chevron Corp. (CVX) over Exxon, saying Shell's 7% yield is sustainable for years even in a $50 per barrel world given its asset sale program and noting Chevron's low valuation, low leverage versus its peers, its free cash flow turnaround from Australian liquefied natural gas projects and its underappreciated business in West Texas' and New Mexico's Permian Basin.

On Wednesday, Raymond James analyst Pavel Molchanov went as far as to downgrade Exxon's stock to underperform, saying the company may be "too defensive" with its overexposure in refining and chemicals, which helped it through previous downturns but will prevent it from benefiting from any upside in oil prices next year. "On the cusp of 2016, a year when we expect at least a modest oil price recovery, Exxon is far from the best way to play that," he said.

Exxon Mobil's stock is down 17% to $80.74 from its 52-week high of $97.20 a year ago.

What could give the golden child of Rockefeller's Standard Oil a boost? An old-fashioned acquisition, preferably a company with a lot of oil in the ground that could increase its oil weighting. Exxon certainly has the wherewithal, with 3.8 billion shares of treasury stock worth more than $300 billion it could use for a purchase. And the slide in oil prices has created a plethora of low-priced prospects.

The company has done some cherry-picking. In September of last year it traded some of its properties for some of Linn Energy LLC's (LINE) in the Permian, the hottest basin in the country because of its profitability even at today's lower oil prices. And in October it revealed that it had picked up leases on 48,000 acres near its own in the area in August. It didn't reveal the sellers or the price, but the purchase boosted its position by a third to 135,000 acres, and observers say it's angling for more.

Anadarko Petroleum Corp.'s (APC) spurned deal to buy Apache Corp. (APA) last week got tongues wagging that Exxon may strike at either company, both of whom have positions in the Permian (Apache has the most with 3.2 million gross acres). "I don't think Apache will be here next year," Porter Trimble, president and founder of KKR & Co. LP (KKR) oil and gas partner Fleur de Lis Energy LLC, predicted at an Independent Petroleum Association of America luncheon in Houston on Wednesday.

Occidental Petroleum Corp. (OXY) has also been mentioned as a potential Exxon target, as it is the largest operator and producer in the Permian, accounting for 13% of the oil produced there and a position of 5 million gross acres. But the company also has a big chemicals division, which would mute any oil-adding benefits. It's also going through a management change, with CEO Stephen Chazen retiring and Oxy "lifer" Vicki Hollub taking over next year.

Pioneer Natural Resources Inc. (PXD) and Whiting Petroleum Corp. (WLL) have also been named as potential Exxon targets, Pioneer for its sizeable positions in the Permian and South Texas' Eagle Ford Shale and Whiting for its properties in the Bakken, where Exxon has expanded its position in recent years. Permian-only player Parsley Energy Inc. (PE) has also been cited as a possibility, even though it's trading near its 52-week high. Even BP plc's name has been floated around, which, despite being British, has more U.S. assets than Exxon. But BP still has lingering issues from its big oil spill in the Gulf of Mexico five years ago and a reluctant CEO in Bob Dudley, who said last spring when asked about the rumors: "Big is not necessarily beautiful."

Indeed, given its past reputation for being "acquisition phobic" (despite its successful purchase of Mobil), Exxon may prefer to do a series of asset deals rather than a big strategic one. Its purchase of XTO Energy Inc. five years ago for $41 billion has been disappointing, with natural gas prices nearly half of what they were then, and no meaningful recovery in sight. Besides, as Exxon's investor relations chief Jeffrey Woodbury reiterated several times on the company's third quarter conference call with analysts, any acquisitions the company would consider would have to compete for capital with projects it's working on or contemplating.

The company has more than a few of those in the works - 32 major upstream projects, at last count. We've got very high-value investment opportunities that will effectively compete for allocation of capital," Woodbury said.

Which is the better stock? Well, one is cheaper but the other is stronger financially and operationally. One thing is clear: Size matters.

by Claire Poole

If you're looking to pick up oil and gas stocks now that oil prices seem to be stabilizing around $60 per barrel, most industry watchers would agree that the top super majors, Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX), would be good for any portfolio. The question is, which one?

It's a tough call, so let's turn first to Fadel Gheit, a longtime oil and gas watcher at Oppenheimer & Co. Full disclosure: The Cairo University-trained chemical engineer spent six years at Mobil Corp., but it was well before it was acquired by Exxon in 1998 for $80 billion.

Both ExxonMobil and Chevron were part of John D. Rockefeller's Standard Oil before the U.S. Supreme Court ruled that it was an "unreasonable" monopoly and it was broken up into 90 independent companies, including Standard Oil of New Jersey (which became Exxon), Standard Oil of New York (Mobil) and Standard Oil of California (Chevron).

ExxonMobil, led by CEO Rex Tillerson, is larger than Chevron, with a market capitalization of $363.7 billion. Chevron, headed by John Watson, has a market capitalization of $197.5 billion.

Gheit rates both stocks as "market perform," although he notes that both have lagged the Standard & Poor's Index in the last 12 months. He said Chevron is cheaper on various multiples, including price-to-earnings (11 versus ExxonMobil's 13), price-to-cash flow (6.76 versus 8.77) and enterprise value-to-Ebitda (7 versus 7.92). It also has a higher dividend yield: 3.9%, versus ExxonMobil's 3.4%.

But ExxonMobil is stronger financially and the only AAA credit-rated company in the industry, Gheit notes. He said that the industry giant is likely to take advantage of the oil downturn and make a large acquisition using treasury shares, which amount to 3.7 billion and are worth around $320 billion. "We believe ExxonMobil will likely capitalize on its competitive advantage by making a large strategic acquisition in the current oil downturn to make up for the XTO acquisition, which proved to be disappointing," he wrote in a note on Tuesday.

Chevron is also thought to be looking at acquisitions, including possibly BP plc and Bakken player Whiting Petroleum Corp. (WLL).

Like their smaller rivals, both companies are shedding assets to raise cash and cut costs, albeit quietly. In the first quarter, ExxonMobil sold its South Texas King Ranch midstream assets to Energy Transfer Partners LP (ETP) for $370 million. And Chevron plans to divest $15 billion in assets through 2017, up from its original target of $10 billion

There's another interesting distinction between the two companies. Gheit thinks ExxonMobil would perform better than Chevron in a relatively low oil price environment, while Chevron would perform better than ExxonMobil in a relatively higher oil price environment. Why? Chevron's earnings are more sensitive to oil prices than Exxon, as oil accounts for 70% of its production volume, versus 50% for Exxon.

In terms of resource building, ExxonMobil is the stronger player replacing 104% of its reserves last year, versus 89% for Chevron.

Other observers vary on their views of the two companies. Simmons & Co. International recently rated ExxonMobil as "neutral" while it has Chevron as overweight. Jefferies & Co., meanwhile, has Exxon Mobil as a "hold" and Chevron as a "buy."

Goldman Sachs analyst Neil Mehta was more definitive in a report on Monday, recommending that investors buy ExxonMobil and sell Chevron. He said ExxonMobil is the only U.S. or European major that has enough free cash flow to cover its dividend if oil hovers around $60 per barrel this year and next. "While other majors will be struggling to keep the dividend flat, we believe Exxon will actually be in a position to increase the dividend for the next several years," he wrote, adding that Chevron will struggle to generate free cash flow after the dividend, which will limit its "capital allocation potential."

Mala Gaonkar, Lone Pine Capital

Legacy tech may not be sexy, but it could yield solid returns. That’s the investment thesis pitched by Lone Pine Capital’s Mala Gaonkar.

Gaonkar focused on Microsoft (MSFT), the software giant that’s in the midst of a major turnaround effort. She said while some investors tend to worry about the consumer Windows business, it only represents 5% of the company’s top line.

Gaonkar said the company’s enterprise business is key. For one, Microsoft is already a big player in the cloud software space, supplying software like Office and Skype through the cloud. This has helped bolster Microsoft’s hold in the space, and has also cut software piracy since users need to pay for a license to access the software.

More broadly speaking, Gaonkar said she believes these four factors make Microsoft a compelling buy: New strong management, solid revenue growth, operating cost cuts and capital return.

Microsoft’s shares were down marginally in afternoon trading, and are up 4.1% for the year.

Keith Meister of Corvex

“Live Más”

Corvex CIO Keith Meister said Yum Brands (YUM) should spin off its China business to unlock shareholder value in both businesses.

“One type of shareholder is going to not like half the business,” he said of the current arrangement.

Meister said Yum has done a good job recovering from the several food-safety scares in China in recent years. Indeed, according to Corvex research, consumers in China, the world’s second-biggest economy, prefer KFC and Pizza Hut, both Yum units, to rivals McDonald’s (MCD) and Subway.

Corvex has built a massive stake in Yum, leaving the fund as a top-five shareholder in the U.S.-based company.

Meister said a spun off Yum China would benefit from being a fully Chinese company, allowing it to lift the weight of being an American firm operating in China. It would also allow the remaining company to better leverage its assets in the ex-China market.

Meister sees 50%-90% upside in Yum, if it were to make such a move.

Yum shares were up about 1% following Meister’s presentation, and have soared 27% for 2015.

David Einhorn, Greenlight Capital

“Meet the Frackers”

Einhorn is very bearish on several fracking firms. His investment case is basically that several of these companies are spending in “a desperate effort to grow.”

“Frackers drilled holes. Lots and lots of holes,” he said. “As oil prices rose it seemed like the frackers should be drowning in cash. But none of them (developed) excess cash flow” even at $100 a barrel oil.

He used Pioneer Natural Resources (PDX) as a case study in his presentation. He said Greenlight’s estimates show Pioneer is actually generating negative returns to capital spending. That is to say, if the firm keeps spending on drilling, it will actually worsen its position, according to Einhorn.

In the current environment, Einhorn sees Pioneer losing about $12 per each barrel of oil equivalent. And in fact, Pioneer is “dramatically overvalued” even with rosy assumptions, according to Einhorn’s estimates.

The stock was off 3.2% following Einhorn’s presentation, cutting its year-to-date advance to about 11%.

Einhorn also alluded to these players in his presentation, although he didn’t specifically review his estimates: Continental Resources (CLR), Concho Resources (CXO), Whiting Petroleum (WLL) and EOG Resources (EOG).

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A slew of hedge-fund heavyweights are set to offer investment strategies at the Sohn Investment Conference Monday. Among the speakers are Pershing Square’s Bill Ackman, Greenlight Capital’s David Einhorn, Appaloosa Management’s David Tepper and DoubleLine Capital’s Jeffrey Gundlach.

Conference organizers expect attendance of 3,000 people. The organization has raised some $50 million over the years for pediatric cancer research and treatment. The managers that present are also encouraged to donate part of their proceeds from trades to the charity. There’s more on how to donate here.

Oil's sure not like it used to be. There was a time when a whiff of unrest in the Middle East could send petroleum skyrocketing. We have had spikes from deliberate Arab embargoes and from unrest in Libya, wars in Iraq and turmoil in Iran.

But we have not seen the Kingdom of Saudi Arabia threatened from the outside by a bordering nation. We have not seen the possibility of rebels planning to attack Saudi Arabia, and we have also never seen our ties with Saudi Arabia as tenuous as they have been, much to the chagrin of a regime that has 10 million barrels a day of production and is still the swing producer in the world that can influence price more than any country on earth.

And this is all that oil can mount? A meager couple of bucks on the news that the Saudis are going to defend themselves from a possible attack from insurgents based in Yemen? You mean oil can't go considerably above $50, still only slightly more than half of where it was not that long ago, even as combined forces allied with Saudi Arabia have had to coalesce to stop this threat?

Welcome to the new world of oil. A world where the U.S. is going to produce more oil this quarter than any time since 1985 and could be producing far more if the price were going to go higher.

Hardly a day goes by where some hapless oil company that thought oil was going to be headed well north of $100 doesn't issue stock to be able to stay afloat. Whiting Petroleum, a huge producer in the Bakken, had floated 35 million shares, a gigantic dilution, in order to be able to pay its bills. We have had a couple dozen oils just like Whiting all struggling to pay the bills with refinanced debt and more equity.

Almost every oil company in the country is high-grading, meaning cherry-picking its best properties and not exploring much, which is why the rig count's been cut in half in a few months' time. But the main thing you need to know about the patch is that every time oil lifts at all, these overstretched companies are selling in the futures market, offering oil at a price that is often only slightly above or barely break-even in order to pay the bills. In other words, U.S. supply keeps overwhelming demand even in the face of what's happening in Yemen.

Now, many think with all we are pumping the U.S. is energy self-sufficient. Totally untrue. 

We are importing seven million barrels a day, roughly one million of it coming from Saudi Arabia. We take their oil because of long-term contracts the Saudis have with refineries that love the consistency of the crude and the consistent nature of the relationship. If the Saudi kingdom were to topple, I have no idea how high oil would go.

Nevertheless, we have to understand that not just our country's producers are trying to raise cash by pumping heavily. So are the producers in Mexico, Canada and Nigeria, all of which are desperate to provide crude to the American market.

So what's the bottom line? 

...ending lower for a third straight week amid weaker oil/strong dollar/mixed economic data reports. The move lower sent the Dow Industrials and S&P 500 back into negative territory for the year (albeit small). NASDAQ posts 2nd consecutive weekly loss, while the S&P and Dow Industrials fall a third week. (Markets bounced off lows in a late day surge by energy stocks).

GM - Announced a$5B stock buyback & reaffirmed long term guidance, shares higher by 2.5% on the OptionsHouse extended hours platform. 

WLL - Whiting Petroleum is up nearly 12% after news that it is exploring a possible sale hit.

FL - Barron's says stock could rally to $70 as store remodels help drive sales as well as a turnaround in EU. Shares up $.50 in the pre.

POZN - Beat EPS forecasts by 6 cents on stronger revenues. Shares were initially up over $8.00, but when news of their CRL (Complete Response Letter) and an active ingredient supplier still had deficiencies reversed that gain, to a loss, shares now trading $6.95, down nearly 5%.

Guest post by Philip Van Deusen, Director of Research, Tigress Financial

Oil’s decline has become the topic of conversation on the street; from Saudi price fixing to Bakken break-even, oil has dominated the recent market narrative. We wanted to highlight some interesting data pertaining to oil and companies in the E&P sector.  

Tigress Financial Partners has been bearish on the price of oil this year and we have been predicting the recent breach of the 2012 lows in our Morning Report. This week WTI broke the 79 level set in 2012 but it looks like WTI has found support after a nearly 30% decline from June’s highs. Also of note is what normally would have been negative headlines for WTI out of Europe on the economic front and Saudi pricing to the U.S. did not have the expected impact on WTI, perhaps oil is finding a bottom. 

Shares of Bakken-centric producers have taken big hits since oil peaked in June on the premise that their cost to get oil out of the ground is higher than other US regions. In our view some of the selling has been the old proverbial throwing the baby out with the bath water and we believe there are opportunities to get long some of these high quality Bakken plays. HES (Buy-Rated) and WLL(Buy-Rated) are two of our top picks in the space. Both have low levels of debt compared to many E&P companies and significant proven reserves in the play.