John Burbank's Passport Capital 13F Filing: Q42008 ~ market folly

Monday, April 13, 2009

John Burbank's Passport Capital 13F Filing: Q42008

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 John Burbank's Passport Capital. This is the first time we've covered Passport's filings, so let's get to some quick background. Burbank founded the $2 billion San Francisco hedge fund in 2000 and they use macroeconomic and sector analysis to select their investments. After identifying macro themes, they drill down to find individual companies with rigorous fundamental research. Burbank has over a decade of experience in markets having previously worked as a consultant and as a director of research at ValueVest Management. His educational background includes an undergraduate degree from Duke University and an MBA from Stanford University. Passport has a very respectable track record of gaining 27% annually. Somewhat recently, we've published a list that Passport sent out to their investors, entitled 'Passport's Suggested Reading List.' The list encompasses some great financial articles worth any investor's time.

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):
Akamai (AKAM)
Terra Industries (TRA)
VMWare (VMW)
JDS Uniphase (JDSU)
Baidu (BIDU)
Riverbed (RVBD)
Logitech (LOGI)
First Solar (FSLR)
Priceline (PCLN)
Citrix (CTXS)
Sunpower (SPWRB)
The rest of their 'new additions' below are tiny pieces of their portfolio. They started new positions in these names, but they are all less than 1% of their overall portfolio. So, keep that in mind:

Pride International (PDE)
Energy Conversion Devices (ENER)
Southwestern Energy (SWN)
United States Oil Fund (USO)
Schlumberger (SLB)
Nvidia (NVDA)
Excel Maritime (EXM)
Nexen (NXY)
Diana Shipping (DSX)
Ultrashort MSCI EAFE (EFU)
Ultrashort S&P500 (SDS)

Some Increased Positions (A few positions they already owned but added shares to)
Petrohawk Energy (HK): Increased by 161%
Petroleo Brasileiro (PBR-A): Increased by 116%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
International Tower Hill Mines (THM): Reduced position by 99.9%
Ultrashort Financials (SKF): Reduced position by 99%
Ultrashort Midcap400 (MZZ): Reduced position by 96%
Ultrashort Russell 2000 (TWM): Reduced position by 96%
Ultrashort Basic Materials (SMN): Reduced position by 96%
Ultrashort Emerging Markets (EEV): Reduced position by 94%
Ultrashort Real Estate (SRS): Reduced position by 94%
Ultrashort Oil & Gas (DUG): Reduced position by 94%
Ultrashort China (FXP): Reduced position by 91%
Sun Micro (JAVA): Reduced position by 74%
Bioform Medical (BFRM): Reduced position by 71%
Mosaic (MOS): Reduced position by 20%
Google (GOOG): Reduced position by 15%

Removed Positions (Positions they sold out of completely)
United States Oil Fund (USO) Puts
SPDR S&P500 (SPY) Puts
Sequenom (SQNM)
Elan (ELN) Puts
Qualcomm (QCOM)
Amgen (AMGN) Calls
American Eagle (AEO) Puts
US Bancorp (USB) Puts
Dick Sporting Goods (DKS) Puts
FBR Capital Markets (FBCM)
Noble Energy (NBL) Calls
Transocean (RIG) Calls
Vale Preferred Shares (RIO-P) Calls
Market Vectors Gold Miners (GDX)
Suntrust Banks (STI) Puts
Market Vectors Gold Miners (GDX) Calls
Barrick Gold (ABX)
JPMorgan Chase (JPM) Puts
Harley Davidson (HOG) Puts
Petroleo Brasileiro (PBR-A) Calls
Mosaic (MOS) Calls
Apple (AAPL) Puts
Ishares S&P100 (OEF) Puts
Amazon (AMZN) Puts
Bank of America (BAC) Puts
Ishares S&P100 (OEF) Calls
Monsanto (MON) Calls
Potash (POT) Calls
SPDR Gold Trust (GLD) Calls

Top 15 Holdings (by % of portfolio)

  1. Mosaic (MOS): 23% of portfolio
  2. Qualcomm (QCOM) Calls: 19% of portfolio
  3. Transocean (RIG): 14% of portfolio
  4. Akamai (AKAM): 9.2% of portfolio
  5. Terra Industries (TRA): 5.1% of portfolio
  6. VMWare (VMW): 4.5% of portfolio
  7. JDS Uniphase (JDSU): 4% of portfolio
  8. Baidu (BIDU): 2.6% of portfolio
  9. Riverbed (RVBD): 2.2% of portfolio
  10. Ziprealty (ZIPR): 1.8% of portfolio
  11. Logitech (LOGI): 1.5% of portfolio
  12. First Solar (FSLR): 1.4% of portfolio
  13. Google (GOOG): 1.2% of portfolio
  14. Priceline (PCLN): 1.2% of portfolio
  15. Citrix Systems (CTXS): 1% of portfolio

Overall, the name of the game for Passport was selling. Some of their bigges moves included selling out of their Gold (GLD) Calls and their Potash (POT) Calls. In the third quarter, those positions were big for Passport at 15.7% and 12.4% of their portfolio, respectively. Most of the positions Passport sold out of completely in Q4 were options related. Those sales could have been due to expiration dates, but they could have also just been plain selling. It is also interesting to see their vast use of various Ultrashort ETFs as a means to place bets on various sectors. Ultrashort ETFs have seen a lot of negativite sentiment lately due to the fact that they are horrible as investments, but great as quick trading vehicles (because of their index correlation problems over time). However, in Passport's defense, each of those positions was only 0.05% of their overall portfolio, which is extremely minimal exposure. Like many other hedge funds we've covered, Passport was also deleveraging and reducing equity exposure in the 4th quarter of 2008. Assets from the collective long US equity, options, and note holdings were $4.3 billion last quarter and were $375 million this quarter. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered:

We cover a new hedge fund each day and you can see the complete list of hedge fund portfolios here.

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