Philip Falcone's Harbinger Capital Partners Portfolio: 13F Filing Q1 2009 ~ market folly

Wednesday, June 24, 2009

Philip Falcone's Harbinger Capital Partners Portfolio: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Harbinger Capital Partners is a $6 billion firm ran by Philip Falcone. Harbinger was started in 2000 with seed capital from Harbert Management ($25 million). 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.

Harbinger has been quite busy over the past year as they have been re-tooling their portfolio and fighting off a massive decline in assets. They were ranked #1 in the top 10 asset losers, losing 60.8% of assets on a year over year basis. As we've been covering on the blog, Harbinger has been decreasing their Cliffs Natural Resources (CLF) position, selling off some of their Calpine (CPN), and is seeing bidders for their NYT stake, among many other portfolio moves.

Harbinger's Offshore fund finished -22.7% for 2008. They were up 0.95% for January 2009, 4.64% for February, and +0.74% for March, leaving them at +4.06% year to date as of then. Most recently, we noted that Harbinger has revealed a new position in Zapata (ZAP).

The following were Harbinger's long equity, note, and options holdings as of March 31st, 2009 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):
The only new position of size is McDermott (MDR). The following new positions are all each less than 0.13% of Harbinger's portfolio, thus representing tiny positions: MDC Partners (MDCA), Weatherford (WFT), and Direxion 3x bear (FAZ)

Some Increased Positions (A few positions they already owned but added shares to)
No notable activity in this category

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Consol Energy (CNX): Reduced by 56%
Hughes Communications (HUGH): Reduced by 56%
ICO Global (ICOG): Reduced by 52%
Cliffs Resources (CLF): Reduced by 20%

Removed Positions (Positions they sold out of completely)
Cablevision (CVC), Navistar (NAC), Electronic Arts (ERTS), US Oil Fund (USO) Puts, Ultrashort financials (SKF), Williams Sonoma (WSM), Seracare Life Sciences (SRLS), Augusta Resource (AZC), Spectrum Brands (SPC).

Top 10 Holdings (by % of portfolio)

  1. Calpine (CPN): 34.24% of portfolio
  2. Leap Wireless (LEAP): 16.24% of portfolio
  3. Cliffs Resources (CLF): 9.2% of portfolio
  4. New York Times (NYT): 8.8% of portfolio
  5. Atlas Air (AAWW): 8.7% of portfolio
  6. McDermott (MDR): 7.3% of portfolio
  7. Consol Energy (CNX): 6.1% of portfolio
  8. Solutia (SOA): 2.7% of portfolio
  9. Constellation Energy (CEG): 2.4% of portfolio
  10. Terrestar (TSTR): 1% of portfolio

Obviously, the main story here is how Harbinger has a whopping 34% of their portfolio in one position, Calpine (CPN). However, there are some caveats here. Firstly, the filing details positions as of 3/31/09. Since then, there have been developments where Harbinger will be selling some of their shares. We've covered the entire CPN situation in detail here.

Other notable holdings round out his top 5 positions with Leap Wireless, Cliffs Resources, New York Times, and Atlas Air. Cliffs Resources is interesting because Harbinger has been involved with them for a while now as they led a campaign against the previously proposed merger with Alpha Natural Resources. Their involvement in the situation was all over the financial news and they still hold the position today. On their New York Times position, they face numerous headwinds, including both macro/secular trends and an ownership family. We've touched on some of the problems in the newspaper industry before, but we have also noted how Harbinger also has another prominent investor in NYT, Mexican billionaire Carlos Slim. In the future, we hope to take a closer look at the NYT in particular to really break down the situation there.

Assets from the collective holdings reported to the SEC via 13F filing were $1.4 billion this quarter compared to $2.3 billion last quarter. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. We've already covered:

- Gurus such as: Soros Fund Management (George Soros) and Jim Rogers.

- 'Tiger Cub' portfolios like: Andreas Halvorsen's Viking Global, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Shumway Capital Partners (Chris Shumway), Chase Coleman's Tiger Global,

- Outperforming funds like: John Paulson's hedge fund Paulson & Co, Eric Mindich's Eton Park Capital, Raj Rajaratnam's Galleon Group,

- Value and activist funds such as: David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Whitney Tison's T2 Partners,

- Concentrated funds that play secular/macro themes such as: Timothy Barakett's Atticus Capital, Bret Barakett's Tremblant Capital Group, Boone Pickens' BP Capital Management, John Burbank's Passport Capital

- And, newer funds on the scene: David Stemerman's Conatus Capital. Check back each day as we cover new fund portfolios.

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