Portfolio Update: Jeffrey Gendell's Tontine Associates Files 13D's ~ market folly

Tuesday, January 20, 2009

Portfolio Update: Jeffrey Gendell's Tontine Associates Files 13D's

Tontine Associates, the hedge fund ran by Jeffrey Gendell, has filed an amended 13D with the SEC and has disclosed a 57.3% ownership stake in Patrick Industries (PATK). The 13D was filed due to their activity on December 11th, 2008 and they now own 5,174,963 shares. You can view the rest of Tontine's portfolio holdings here.

Additionally, they recently filed an amended 13D and have disclosed a 48.7% ownership stake in Broadwind Energy (BWEN). Also worth noting from the filing is the fact that they have

"extended the date by which the Company is required to file the shelf registration statement to March 31, 2009... and the Reporting Persons have begun to explore alternatives for the disposition of their equity interests in the Company, which alternatives may include, without limitation: (a) dispositions of Common Stock through open market sales, underwritten offerings and/or privately negotiated sales by the Reporting Persons, (b) a sale of the Company, or (c) distributions by the Reporting Persons of their equity interests in the Company to their respective investors. The Reporting Persons expect to engage in discussions with the Company’s management and Board of Directors in the evaluation of such alternatives."
As we've covered before on the blog, Tontine has had a very rough year and will be closing two of its hedge funds. The problem with their struggles is that they are the largest shareholder of some 8 companies (including BWEN). So, they are obviously evaluating their options.

Gendell & Tontine specialize in macro investing and take very large, concentrated positions in companies he feels will benefit from those macro themes. Additionally, he will take on an activist role when necessary, to ensure shareholder returns. The fund has posted returns in excess of 100% in both 2003 and 2005. Conversely, this year has been the year from hell for Tontine. Recently, they announced they would be closing two of their hedge funds: Tontine Capital LP and Tontine Capital Partners LP. Two of Tontine's funds will remain open: Tontine-25 and Tontine Financial. It has definitely been an astonishing year for Gendell, whose Tontine firm is named after an annuity invented by Lorenzo de Tonti. In such an annuity, investors contribute and collect dividends. As investors each die off, their share is left to the remaining partners. Therefore, the last man alive receives all the money. Gendell's desire is clearly to be that 'last investor' remaining. Such a goal becomes slightly ironic when you consider his firm suffered monumental losses and almost 'died' this past year. Gendell explains the turmoil they faced in his October letter to investors (.pdf format).

Taken from Google Finance,

Patrick Industries is "a manufacturer and supplier of building products and materials to the manufactured housing and recreational vehicle industries. In addition, the Company is a supplier to certain other industrial markets, such as kitchen cabinet, furniture manufacturing, office furniture, commercial fixtures and furnishings, marine, architectural, and the automotive aftermarket."

Broadwind "formerly Tower Tech Holdings Inc., through Tower Tech Systems, Inc. (Tower Tech), is engaged in the manufacturing of fabricated towers for wind turbines that are sold to a limited number of customers for use in the support of wind turbines. These wind turbines are used in the generation of electricity throughout the United States. It offers customers wind tower support structure and monopiles."

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