Harbinger Capital Partners (Philip Falcone): Hedge Fund Tracking - 13F Filing Q3 2008 ~ market folly

Tuesday, January 6, 2009

Harbinger Capital Partners (Philip Falcone): Hedge Fund Tracking - 13F Filing Q3 2008

This is the 3rd Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F filings here.

Next up, we have Harbinger Capital, a $13 Billion firm ran by Philip Falcone. Harbinger was started in 2000 with seed capital from Harbert Management ($25 million). And, just recently, we've learned that Falcone is buying out Harbert to be the owner of the firm. Falcone made a name for himself in 2007 when he started shorting subprime mortgages and returned 117%. He focuses on intensive credit research, on bankruptcies and proxy fights, and was previously involved with high yield debt trading. Lately, he's been focused on equities it seems, but his new fund has redirected his focus back to his roots.

At one point during this year, they were up as much as 42%. But, their fortunes turned as they found themselves -13% for the year as of October, as we noted in our hedge fund performance numbers post. One position that treated them nicely was their short of Wachovia (WB), which we detailed here. Back in September, in a letter to investors, Falcone had assured investors that Harbinger was adequately positioned to stave off any further volatility the markets may bring their way, noting that the firm had reduced exposure to some of their higher volatility holdings (both on the long and short side). They have been very proactive in managing their portfolio this year, as evidenced by their Q2 portfolio. For more on the manager of Harbinger, then head over to our post about Philip Falcone.

The following were their long equity, note, and options holdings as of September 30th, 2008 as filed with the SEC. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
Navistar (NAV)
United States Oil Fund (USO) Puts
Constellation Energy (CEG)
Alpha Natural Resources (ANR)
Seracare Life Sciences (SRLS)
Bank of Montreal (BMO)
Owens Corning (OC-WS-B) Warrants B
Green Builders (GBH)

Some Increased Positions (A few positions they already owned but added shares to)
Ultrashort S&P 500 ETF (SDS): Increased position by 150%
Ultrashort Dow30 ETF (DXD): Increased position by 150%
Cablevision (CVC): Increased position by 111%
Solutia (SOA): Increased position by 69%
Nicor (GAS): Increased position by 31%
Medivation (MDVN): Increased position by 12%
Calpine (CPN): Increased position by 5%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Northwest Airlines (NWA): Reduced position by 99%
Ashland (ASH): Reduced position by 94%
Cablevision (CVC) Calls: Reduced position by 60%
Ultrashort Financials ETF (SKF): Reduced position by 50%
Southern Union (SUG): Reduced position by 37%
Hughes Communications (HUGH): Reduced position by 20%
Mirant (MIR): Reduced position by 8%

Removed Positions (Positions they sold out of completely)
Georgia Gulf (GGC)
Horsehead Holding (ZINC)
Wachovia (WB) Puts
Nisource (NI)
Spdr S&P Retail ETF (XRT) Puts
Peabody Energy (BTU)
Yahoo (YHOO)
Wiliams Sonoma (WSM)
Corn Products (CPO)
Sprint Nextel (S)
AK Steel (AKS)
Freeport McMoran (FCX)

Top 20 Holdings (by % of portfolio)

  1. Calpine (CPN): 19.2% of portfolio
  2. Cliffs Natural Resources (CLF): 9.7% of portfolio
  3. Cablevision (CVC): 8% of portfolio
  4. Navistar (NAV): 7.9% of portfolio
  5. Solutia (SOA): 6.2% of portfolio
  6. Atlas Air (AAWW): 6.1% of portfolio
  7. Mirant (MIR): 5.8% of portfolio
  8. Leap Wireless (LEAP): 5.4% of portfolio
  9. New York Times (NYT): 5% of portfolio
  10. United States Oil Fund (USO) Puts: 4.8% of portfolio
  11. Owens Corning (OC): 4.5% of portfolio
  12. Ultrashort Financials ETF (SKF): 3.4% of portfolio
  13. Ultrashort S&P500 ETF (SDS): 1.8% of portfolio
  14. Nicor (GAS): 1.6% of portfolio
  15. Ultrashort Dow 30 ETF (DXD): 1.6% of portfolio
  16. Constellation Energy (CEG): 1.6% of portfolio
  17. Medivation (MDVN): 1.2% of portfolio
  18. Hughes Communications (HUGH): 0.9% of portfolio
  19. RTI International (RTI): 0.88% of portfolio
  20. Augusta Resource (AZC): 0.87% of portfolio

Assets from the collective long US equity, options, and note holdings were $9.3 billion last quarter and were $4.8 billion this quarter. As you can see, Harbinger decreased long equity and options exposure pretty significantly. They completely sold out of numerous previous top holdings of their firm. They sold completely out of Freeport McMoran (previously 11% of their firm's holdings), AK Steel (previously 8% of their firm's holdings), and Sprint Nextel (previously over 6% of their firm's holdings). So, they were unloading some very large positions. It is also worth mentioning that ever since the 13F filing has come out, Harbinger has been active in filing various 13D and 13G forms which detail changes in their ownership of various companies listed above. We will also be covering these new position details over the next few days so everything ties into a cohesive whole. After all, Harbinger has changed up their portfolio quite a bit over the course of the year. Please note that we have not detailed changes to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings. They do not reflect their cash, short portions, or holdings in other markets (currency, commodities, debt, foreign markets, private equity etc). This is just one of many funds in our hedge fund tracking series in which we're tracking 35+ prominent funds. The other funds we've already covered include:

Overall, its been one of the worst years ever for hedge funds, as we noted in our new November hedge fund performance number update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.

More on Falcone, Harbinger, & hedge funds:
- Harbinger profits on Wachovia short
- Harbinger's Q2 portfolio
- Prominent Hedge Fund manager interviews
- Hedge Fund investor letters
- Hedge Fund Rankings
- November hedge fund performance numbers
- October hedge fund performance numbers

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