Pioneer Natural Resources (PXD)

(Top Pick Oct 17/16, Down 23%) He used a stop loss. The tidal theme went out and he exited. After a difficult year he got stopped out. He was X-energy until about a month ago.

He looks for groups that have become out of favour over a period of time, where breadth has been expanding. There are winners and losers when a sector goes through the kind of blow up that energy did. This company has very little debt, and have just about the lowest finding costs in the Permian Basin. They can drill holes and produce oil for just less than $50 a barrel. They have 55% of their production hedged forward, over the next 2 years. They have capital in the bank to complete their drilling programs over the next 2 years. If you think that the price of oil can be anything above $50, they will have the opportunity to not only make money, but to make acquisitions of companies that are not financially sound. Dividend yield of 0.04%.

The groups in energy that have been doing well, are those exploration/development companies that are in very specific geographic regions where there are very low finding costs and, with technology, are growing reserves aggressively. This one is in the Permian Basin in Texas, one of the oldest US oil fields. They believe they have 8 Bakken zones stacked one on top of the other and have about 1200 drilling targets. A high growth company. His one concern is that WTI prices have been backing off in the last few weeks. While it has less impact on these companies that are finding oil, ultimately, if it gets tough enough, it will impact all oil stocks.

There are several regions that have had big growth in reserves and production in the last 2-3 years. This company has enormous land holdings in the Permian basin and the Eagleford and have pioneered Fracing of sand and getting tremendous net backs on the drilling. Doing, $60-$65 a barrel. Have about 1200 drilling targets they can work on over the next few years. Very, very strong balance sheet.