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The Decade's Best Fund Manager Shares His Top Energy Stock Picks

Posted Jul 14, 2009 02:59pm EDT by Peter Gorenstein in Investing, Commodities
Related: xlf, btu, aci, mee, hk, swn, pxp

Dan Rice's $800 million BlackRock Energy & Resources Fund stands alone as the top U.S. equity mutual fund in the past decade, according to Morningstar. The fund gained an average of 20% a year in the 10 years ended May 31.

In this clip, Rice says part of his success is simply a function of the rise in commodity pries over recent years, as well as his focus on smaller-cap stocks. "We happened to be in the right place at the right time," he admits.

Rice is bullish now on the outlook for most energy stocks, believing they should do well if and when the global economy eventually recovers, driving demand for commodities.

Coal "is the most under appreciated sector" in energy.  Even with Obama’s carbon tax hanging over the market, he claims, "the Obama plan actually has no effect, it doesn’t anything in terms of coal demand/supply."  Rice’s favorite coal picks are: Peabody, Arch Coal, Massey Energy.

Rice also thinks there’s money to be made in certain small cap oil stocks.  Among his top picks are some of the stocks that got most clobbered last year: Plains Exploration and Clayton Williams Energy. He also likes a few Canadian stocks like Highpine Oil & Gas and Tristar Oil & Gas.

Though he does warn natural gas is more of a stock picker’s sector, he does like certain  “really low cost producers” with “shale exposure,” like Petrohawk, Southwestern Energy, Goodrich Petroleum and Range Resources.

Rice's fund is currently long all the stocks mentioned here.

If you are interested in investing in his fund, be aware you might be in for a bumpy ride.  The fund fell 53% last year while it returned more than 50% in 2000, 2003, and 2005, Bloomberg reports.

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