Corporate raiders are economic assassins. They strike fear into the hearts of company executives. And T. Boone Pickens has been one of the best.
The oilman turned corporate raider was one of the pioneers of the leveraged buyout craze of the 1980s, producing huge gains for his investors while becoming one of the richest people in America with a net worth of $1.4 billion. As a legendary oilman, investor and corporate raider, Pickens has a knack for two things: knowing when to strike and when to play big.
Pickens showcased his lethal business smarts at an early age. At age 12, he expanded his paper route from 28 to 156 papers. In 1956, after graduating with a degree in geology from Oklahoma A&M and working for Phillips Petroleum for three years, Pickens founded the company that would eventually become Mesa Petroleum.
By the early 1980s, Mesa had grown into one of the largest independent gas and oil companies in the world, transforming Pickens into a business celebrity and an extremely wealthy man. But unsatisfied to rest on his laurels, the booming days of leveraged buyouts in the 1980s saw Pickens make some of the most targeted and leveraged investments of his life.
T. Boone Pickens' Investment Strategy And Big Wins
In the early 1980s, Pickens correctly predicted that the United States was in the early stages of a booming economic cycle that would drive demand for energy resources. Recognizing the magnitude of the opportunity and trend, he set about to grow his company aggressively. His favored strategy was the leveraged buyout, wherein one company buys another with little cash and lots of debt.
|Pickens has a knack for two things: knowing when to strike and when to play big.|
This a high-risk investment that has the ability to produce huge gains in a bull market and huge losses in a bear. Either way, the core of Pickens' investment philosophy was on display: knowing when to strike and when to play big.
Pickens earned his corporate raider moniker as a pioneer in the leveraged buyout boom of the 1980s, executing a number of high-profile deals that pushed the limits of scale and leverage. In 1981, Pickens led Mesa's takeover of Hugoton Production, which at the time was 30 times larger than Mesa. Pickens and Mesa followed that up with attempted takeovers of Cities Service, Gulf Oil, Phillips Petroleum and Unocal. Pickens later successfully executed the acquisition of Pioneer Petroleum and the midcontinent assets of Tenneco. These leveraged acquisitions enabled Pickens and his investors to score huge gains in the bullish energy market in the 1980s.
T. Boone Pickens' Portfolio: What's He Holding Now?
Pickens had the right amount of insight and experience to identify the coming oil boom in the 1980s and knew when to play big. But if you missed out on Pickens' big play in energy the first time around, don't worry -- he's up to his old tricks.
Pickens is once again making big investments in energy. But he's no longer betting on crude. He's been vocal about his take on peak oil, claiming that world oil production is entering a period of production decline. That's why Pickens is leading the charge in natural gas.
Pickens has been a pioneer in the natural gas market. In 1997 he formed Pickens Fuel Corp. and began touting natural gas as the best alternative to gasoline because of its domestic abundance and lower cost and toxicity. The company changed its name to Clean Energy Fuels Corp. in 2001 and now owns and operates natural gas fueling stations from British Columbia to the U.S.-Mexico border. Pickens' capital management firm BP Capital is also making big bets on natural gas companies, with each of his $100 million fund's top 10 holdings in energy and natural gas.
Pickens has also dabbled in wind, but with much less success than his fossil-fuel efforts. In October 2012, Pickens sold his stake in a huge wind-farm development proposal, suffering a $150 million loss. This experience reinforced his belief that natural gas is the energy source of the future, saying: "I've lost my (rear end) in wind power. Oil and gas are where the jobs are at."
What's he holding now?
Action to Take --> There are few people in the world with as much insight into the global energy markets as T. Boone Pickens. The oilman turned corporate raider cashed in on the bullish trend in oil during the 1980s, producing big gains for investors and becoming a billionaire in the process. But now, 25 years later, Pickens sees another big opportunity for investors to cash in on a bullish trend -- this time in natural gas.
And there are plenty of great ways to cash in. United States Natural Gas (NYSE: UNG) is an ETF (exchange-traded fund) that provides investors with exposure to natural gas prices. EOG Resources (NYSE: EOG) is a domestic leader in the booming natural gas industry, making big investments in the Bakken and Barnett shale formations, two of the biggest shale plays in the country. Carbo Ceramics (NYSE: CRR) is a pick-and-shovel play in the natural gas space, specializing in selling consumable materials used in the extraction process of natural gas.