Tontine Associates (Jeffrey Gendell): Hedge Fund Tracking - 13F Filing Q3 2008 ~ market folly

Wednesday, January 7, 2009

Tontine Associates (Jeffrey Gendell): 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 is Tontine Associates. Founded 11 years ago, Tontine is a $6 billion firm ran by Jeffrey Gendell. Gendell graduated from Duke and worked in Corporate Finance for Smith Barney. He specializes in macro investing and takes 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. Tontine was -65.7% for the month of October and was -76.8% for the year at that time, as we noted in our post on hedge fund performance numbers. 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 year. Gendell explains the turmoil they faced in his October letter to investors (.pdf format).

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)
Ultra Financials ETF (UYG)
OM Group (OMG)
General Cable (BGC)
Myr Group (MYRG)
Mainsource Financial (MSFG)
Marshall & Isley (MI)
First Horizon (FHN)
First Midwest (FMBI)
Summit Financial (SMMF)
National City (NCC) Calls

Some Increased Positions (A few positions they already owned but added shares to)
Emcor (EME): Increased position by 44.5%
Perini (PCR): Increased position by 33%
AK Steel (AKS): Increased position by 30%
Graftech (GTI): Increased position by 19%
Citigroup (C) Calls: Increased position by 11%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Foster Wheeler (FWLT): Reduced position by 50%
Goodyear Tire & Rubber (GT): Reduced position by 32%
KBR (KBR): Reduced position by 28%
Cliffs Natural Resources (CLF): Reduced position by 23.5%
DST Systems (DST): Reduced position by 22%
Quanta Services (PWR): Reduced position by 18%
Trinity Industries (TRN): Reduced position by 18%
Trueblue (TBI): Reduced position by 16%
Shaw Group (SGR): Reduced position by 15%
AMR (AMR): Reduced position by 13%
A.O. Smith Corp (AOS): Reduced position by 13%

Removed Positions (Positions they sold out of completely)
Marsh & McLennan (MMC) Calls
Meritage Homes (MTH)
Citizens Republic (CRBC)
BCSB Bankcorp (BCSB)
Firstfed Financial (FED)
Meta Financial (CASH)
Astoria (AF)
Hawkins (HWKN)
New York Community Bancorp (NYB)
United Bankshares (UBSI)
American International Group (AIG) Calls
Community Bank System (CBU)
Horton DR (DHI)
Downey Financial (DSL)
Koppers Holdings (KOP)
Centex (CTX)
Ryland Group (RYL)
National City (NCC)
Toll Brothers (TOL)
Englobal (ENG)
Timken (TKR)
Goldman Sachs (GS)
M&T Bank (MTB)
Ishares Russell 2000 (IWM)
Spdr S&P 500 ETF (SPY)

Top 20 Holdings (by % of portfolio)

  1. Quanta Services (PWR): 4.6% of portfolio
  2. Bank of America (BAC) Calls: 3.7% of portfolio
  3. Trinity Industries (TRN): 3.5% of portfolio
  4. Thomas & Betts (TNB): 3.3% of portfolio
  5. AMR Corp (AMR): 3.2% of portfolio
  6. AK Steel (AKS): 3% of portfolio
  7. Cliffs Natural Resources (CLF): 2.8% of portfolio
  8. Navistar (NAV): 2.8% of portfolio
  9. Exide Technologies (XIDE): 2.7% of portfolio
  10. Shaw Group (SGR): 2.5% of portfolio
  11. KBR (KBR): 2.3% of portfolio
  12. Integrated Electrical Services (IESC): 2.3% of portfolio
  13. Goodyear Tire & Rubber (GT): 2.1% of portfolio
  14. Emcor (EME): 2% of portfolio
  15. Esco Technologies (ESE): 1.9% of portfolio
  16. Hexcel (HXL): 1.8% of portfolio
  17. Enersys (ENS): 1.8% of portfolio
  18. Graftech (GTI): 1.6% of portfolio
  19. DST Systems (DST): 1.49% of portfolio
  20. Citigroup (C) Calls: 1.48% of portfolio

Assets from the collective long US equity, options, and note holdings were $10.6 billion last quarter and were $6.5 billion this quarter. They saw a massive drop-off in collective assets mainly due to poor performance. It is also worth mentioning that ever since the 13F filing has come out, Tontine 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 position adjustments over the next few days so that everything ties into a cohesive whole. Additionally, Tontine has been seeking options for positions in which they are the largest shareholder, including: Miscor Group Ltd (MIGL), Broadwind Energy (BWEN), Exide Technologies (XIDE), Neenah Enterprises Inc (NENA), Integrated Electrical Services Inc (IESC), Patrick Industries (PATK), Innospec Inc (IOSP), and Westmoreland Coal Co (WLB). Tontine has had a hectic year, to say the least. 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 Gendell, Tontine, & hedge funds:
- Tontine to close 2 funds
- Tontine's Q2 portfolio
- Tontine October letter to investors
- Prominent Hedge Fund manager interviews
- Hedge Fund investor letters
- Hedge Fund Rankings
- November hedge fund performance numbers
- October hedge fund performance numbers

blog comments powered by Disqus