Philip Falcone's Harbinger Capital Partners 13F Filing: Q4 2008 ~ market folly

Tuesday, April 14, 2009

Philip Falcone's Harbinger Capital Partners 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, 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 Harbinger's new fund will redirect his focus back to his roots.

At one point during 2008, they were up as much as 42%. But, their fortunes turned as their Offshore fund finished -22.7% for the year as noted in our 2008 hedge fund performances list. 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).

In Harbinger's latest letter to investors, they noted that they had covered their shorts on metal producers and financials and also got out of some credit default swaps. While they have been winding down equity positions, they are sticking with their major stakes in Calpine (CPN) and the New York Times (NYT). Falcone also mentioned that they had added trade claims on an energy company and credit default swaps on various consumer plays (retailers, products, & services). They have also been selling off some Cliffs Resources (CLF), essentially to ensure that their portfolio balance is where they want it to be. Harbinger was +0.74% for March and sits at +4.06% year to date for 2009, as noted in our hedge fund March performance post. Lastly, Philip Falcone was recently unveiled as a part of Forbes' billionaire list.

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC in Harbinger's Master Fund filing. 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):
Consol Energy (CNX)
Electronic Arts (ERTS)
Williams Sonoma (WSM)
ICO Global (ICOG)

Some Increased Positions (A few positions they already owned but added shares to)
New York Times (NYT): Increased by 68%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Mirant (MIR): Reduced by 96%
Southern Union (SUG): Reduced by 96%
General Moly (GMO): Reduced by 95%
Ultrashort Financials (SKF): Reduced by 92%
Spectrum Brands (SPC): Reduced by 87.5%
RTI International (RTI): Reduced by 85%
Media General (MEG): Reduced by 67%
Medivation (MDVN): Reduced by 64%
United States Oil Fund (USO) Puts: Reduced by 61%
Constellation Energy (CEG): Reduced by 40%
Cablevision (CVC): Reduced by 14%

Removed Positions (Positions they sold out of completely)
Owens Corning (OC)
Ultrashort S&P500 (SDS)
Nicor (GAS)
Ultrashort Dow 30 (DXD)
Sunoco (SUN)
Bank of Montreal (BMO)
Cablevision (CVC) Calls
Northwest Airlines (inactive)
Green Builders (GBH)

Top 15 Holdings (by % of portfolio)

  1. Calpine (CPN): 23% of portfolio
  2. Cliffs Resources (CLF): 10.5% of portfolio
  3. Consol Energy (CNX): 9.85% of portfolio
  4. Cablevision (CVC): 9.6% of portfolio
  5. New York Times (NYT): 9.1% of portfolio
  6. Leap Wireless (LEAP): 8% of portfolio
  7. Navistar (NAV): 6.5% of portfolio
  8. Atlas Air (AAWW): 6% of portfolio
  9. Solutia (SOA): 4.2% of portfolio
  10. Electronic Arts (ERTS): 3.32% of portfolio
  11. Constellation Energy (CEG): 2.1% of portfolio
  12. United States Oil Fund (USO) Puts: 1.6% of portfolio
  13. Hughes Communications (HUGH): 0.9% of portfolio
  14. Medivation (MDVN): 0.8% of portfolio
  15. Ultrashort Financials (SKF): 0.6% of portfolio

Yet again we see another fund with some massive deleveraging and equity exposure reduction. Harbinger runs a somewhat concentrated portfolio in that a large percentage of their equities exposure is in the top 8 or 9 positions, with Calpine far and away the largest holding. Their Puts on USO worked out well as oil prices declined steeply (remember, these positions were as of Dec. 31st, before oil started to rebound). We also want to make sure to highlight that you've got to monitor their Cliffs Resources (CLF) position almost on its own, since they have such a large stake in it but have been actively selling. In the past, they have sold some shares because they were bringing their portfolio percentage allocations back in line. So, this 13F is not necessarily up to date with the most recent changes to this position. And, as a matter of fact, they just filed yet another amended 13D on CLF yesterday which we'll be covering in a separate post. We also want to note that since this 13F filing, they've also made numerous other SEC filings with regards to both current and (now) old positions. Assets from the collective long US equity, options, and note holdings were $4.8 billion last quarter and were $2.2 billion 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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