Tuesday, December 22, 2009, 7:19PM ET - U.S. Markets Closed.

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

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.

22 Comments

Mike
Mike - Tuesday July 14, 2009 03:07PM EDT

Energy is the past, present and future... never a bad idea to have a portion of your portfolio in energy.

Reedersong
Reedersong - Tuesday July 14, 2009 03:11PM EDT

I LIKE TO SHOOT MY MOUTH OFF!!

sodosm
sodosm - Tuesday July 14, 2009 03:16PM EDT

Whenever goverment has a say in a certain economic sector you are rolling dice. It's no more supply and demand, it's politics. rice is bullish, and probably right for a while ... well OK, it's a good idea if we play with YOUR money.

Tex
Tex - Tuesday July 14, 2009 03:32PM EDT

It's sunny & windy enough in Texas to make a major push into alternative energy. Plus we have a lot of gas. We need to do what ever it takes to stop using foreign oil.

Ray
Ray - Tuesday July 14, 2009 03:37PM EDT

We will have clean coal with cap and trade. The chinese can buy our dirty coal. Energy demand will continue worldwide. Commodities are good against the dollar. If it doesn't work out carbon can be made into diamonds. The GDP at 2% is a futures play.

IAN
IAN - Tuesday July 14, 2009 03:46PM EDT

does any one have any interest in ocean power technologies

Godertv
Godertv - Tuesday July 14, 2009 04:28PM EDT

The energy we are using,all came from the sun,including nuclear.Once we have burned it all and did not suffocate from CO2 poisening,may be we will be using the sun's energy.I repeat may be.May be you invest in sun energy.

William
William - Tuesday July 14, 2009 04:29PM EDT

DON'T SHARE MY WEALTH, SHARE MY WORK ETHIC!!!!!!!!!!!!!!!!!!

Ian C
Ian C - Tuesday July 14, 2009 04:29PM EDT

Is this an arithmetic average, where you can lose all your money and stillhave an average gain? Over the last 5 years this fund has lost 50% of its value.

lisalipps
lisalipps - Tuesday July 14, 2009 04:40PM EDT

Obama's "Cap and Tax' energy policy will cripple demand for energy when all the remaining US factories and manufactures shut down and move overseas. Oh I forgot about the stupid wind mills we will build to power our golf karts made from Government Motors and the little cluster green government homes we will all live in.

- Tuesday July 14, 2009 04:59PM EDT

Thmk49, Wake up, dude! The price of oil has gone from $140 to $62 or whatever it closed at today. As a result, all of these companies have gotten their clock cleaned. But as TTsaid at the top of the piece, the average annual performance of the fund over TEN years is excellent. Furthermore, check your figures: Lipper shows five-year average annual returns of +8.31%.

GerritD
GerritD - Tuesday July 14, 2009 05:12PM EDT

Alternate energy stocks are going to be the next RAILROAD/TECH boom! You heard it here 1st!

Kyle
Kyle - Tuesday July 14, 2009 05:33PM EDT

Generic Comment

san
san - Tuesday July 14, 2009 06:32PM EDT

There is plenty enough coal to keep us warm and generate energy long after oil and gas runs out. Wash the fumes and store the acid rain under ground in the old empty oil drill sites. :)

Yahoo! Finance User
Yahoo! Finance User - Tuesday July 14, 2009 06:38PM EDT

DRX.L provides 7% of UK energy needs from coal fired power stations. So undervalued it's generting a 10% dividend. Get that from your bank?

Michelle
Michelle - Tuesday July 14, 2009 06:45PM EDT

I just clicked on their stock price! It was $80 dollars last year and now $20. And this guy is a genius? Gimme a break! Aaron why don't you do some basic research before stating 20% return each year. In 2001 the price was $21 and now in 2009 it is $21.

Polski
Polski - Tuesday July 14, 2009 10:49PM EDT

All our stock was up until Sep 08, then the plug was pulled, went down 60%, much still at 50%, does this make me a genius? Don't trust whitey!

shags1_23
shags1_23 - Wednesday July 15, 2009 01:54AM EDT

GerritD - Tuesday July 14, 2009 05:12PM EDT Alternate energy stocks are going to be the next RAILROAD/TECH boom! You heard it here 1st! ============================================= I said that a month ago.

Yahoo! Finance User
Yahoo! Finance User - Wednesday July 15, 2009 08:14AM EDT

Cap and Trade will make some of the energy companies very rich. The one I work for has projects just waiting to be implemented to reduce emissions and then sell them.

Steven
Steven - Wednesday July 15, 2009 08:18AM EDT

WTF????? I thought Nick Roditi was the best performing fund manager of the last decade? +71% per year.... Who is this wanker? Some one who is still trading the previous bull market?

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