Jeffrey Gendell's Tontine Associates 13F Filing Q4 2008 ~ market folly

Monday, March 30, 2009

Jeffrey Gendell's Tontine Associates 13F Filing Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Jeffrey Gendell's Tontine Associates. If you're unfamiliar with Tontine, they specialize in macro investing and take very large, concentrated positions in companies Gendell 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, 2008 was the year from hell for Tontine.

Jeffrey Gendell's hedge fund firm has been quite busy over the past year, and in particular over the past few months. As two of his hedge funds have closed down, his portfolio has been shuffled around all over the place. (Some of their recent changes can be seen here). As we've detailed before, Tontine has recently sold out of 15 positions, as well as filed amended 13D's to many of their holdings, and then they most recently sold out of 9 more positions. They closed 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. Then, most recently, they filed a 13D on Neenah Enterprises (NENA).

As listed in our hedge fund year-end performance numbers post, their Tontine Partners LP fund was -12.1% for December and finished the year -91.5%. Yes, you read that correctly. Their Tontine 25 LP fund was -2.2% for December and ended 2008 -63.6%. As such, Gendell made Alpha's list of 'Biggest hedge fund losers for 2008' (See also top 25 gainers). Gendell also opened the new Tontine Total Return Fund. This fund will not use leverage and will invest in assets deemed undervalued. The portfolio shuffling has been nonstop and we'll continue to monitor things going forward.

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).

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
Chart Industries (GTLS)
Ultrashort Financials (SKF)
Englobal Corp (ENG)
Regional Bank HOLDRS (RKH)
Halliburton (HAL)
Oil Service HOLDRS (OIH)

Some Increased Positions (A few positions they already owned but added shares to)

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
KBR (KBR): Reduced by 96.5%
Quanta Services (PWR): Reduced by 96%
Trinity Industries (TRN): Reduced by 95.8%
Thomas & Betts (TNB): Reduced by 94%
Shaw Group (SGR): Reduced by 94%
Enersys (ENS): Reduced by 91%
Smith (AOS): Reduced by 88%
Navistar (NAV): Reduced by 85%
Brush Engineered Materials (BW): Reduced by 84.6%
Mastec (MTZ): Reduced by 83%
Nacco (NC): Reduced by 77.7%
Sterling Financial (STSA): Reduced by 76%
MYR Group (MYRG): Reduced by 50%
Sun Bancorp (SNBC): Reduced by 48.7%
Matrix (MTRX): Reduced by 44%
Citigroup (C) Calls: Reduced by 42%
Bank of America (BAC) Calls: Reduced by 36%

Removed Positions (Positions they sold out of completely)
Hovnanian (HOV)
Susquehanna (SUSQ)
MI Homes (MHQ)
Baker (BKR)
Comfort Systems (FIX)
Continental Airlines (CAL)
Internet Capital Group (ICGE)
Furmanite (FRM)
LB Foster (FSTR)
Webster (WBS)
Champion (CHB)
US Airways (LCC)
Whitney (WTNY)
Greenbrier (GBX)
Bank of America (BAC)
Citigroup (C)
YRC Worldwide (YRCW)
Associated Bancorp (ASBC)
Pike Electric (PEC)
Chemtura (CEM)
General Cable (BGC)
Itron (ITRI)
US Steel (X)
Astec (ASTE)
Perini (PCR)
Ultra Financials (UYG)
DST Systems (DST)
Graftech (GTI)
Emcor (EME)

Top 20 Holdings (by % of portfolio)

  1. Exide Technologies (XIDE): 17.75% of portfolio
  2. Integrated Electrical (IESC): 10.6% of portfolio
  3. Bank of America (BAC) Calls: 8.77% of portfolio
  4. Innospec (IOSP): 4% of portfolio
  5. Performed Line Products (PLPC): 3% of portfolio
  6. Citigroup (C) Calls: 2.6% of portfolio
  7. Matrix Service (MTRX): 2% of portfolio
  8. Mastec (MTZ): 1.89% of portfolio
  9. Wabash (WNC): 1.8% of portfolio
  10. Westmoreland Coal (WLB): 1.5% of portfolio
  11. Navistar (NAV): 1.47% of portfolio
  12. Quanta Services (PWR): 1.2% of portfolio
  13. Thomas & Betts (TNB): 1.17% of portfolio
  14. Ferro (FOE): 1.15% of portfolio
  15. Sun Bancorp (SNBC): 1.14% of portfolio
  16. Brush Engineered Materials (BW): 1% of portfolio
  17. Sterling Financial (STSA): 1% of portfolio
  18. Oil Service HOLDRS (OIH): 0.99% of portfolio
  19. Halliburton (HAL): 0.98% of portfolio
  20. North American Energy (NOA): 0.97% of portfolio

Please keep in mind that this portfolio is undergoing a ton of changes and is even more-so 'out of date' than other funds that we cover given their unique circumstances. This is what they reported as of December 31st, 2008 and as we referenced up above, you've got to monitor the 13Ds and 13Gs, as they've been very active filing them January through March. That is the only way to get a truly 'up to date' look at their portfolio, since they've got so much going on at once. So, we highly recommend you check out the links we've posted up above for the most recent activity. This 13F filing is the definition of portfolio unwinding. Since they had to close down two funds, you saw an enormous amount of selling. Assets dropped from $6.5 billion in reported long US equity, options, and note holdings last quarter all the way down to $706 million this quarter. That is some serious unwind and is the direct result of 2 funds closing down. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds.

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Check back daily as we'll cover a new fund each day.

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