What We're Reading ~ Hedge Fund Links 7/12/13

Hedge funds are for suckers [BusinessWeek]

Kyle Bass: China could see 'full scale recession' next year [ValueWalk]

JOBS Act: On hedge fund marketing strategies [AllAboutAlpha]

Perry Capital sues US Treasury over Fannie & Freddie dividends [FT]

Also,  here's Berkowitz's legal filing re: Fannie/Freddie [Reuters]

Ackman's Pershing Square trying to raise $ for single-stock fund (AGAIN) [Reuters]

Eddie Lampert's troubles at Sears [BusinessWeek]

Are hedge funds worth the money? Depends on who you ask [Forbes]

Even more negativity: don't invest in hedge funds [The Atlantic]

A label for activist investors that no longer fits [NYTimes]

RenTec's Jim Simons: strategy to shield profit from taxes draws IRS ire [Bloomberg]

Investment banks eye hedge funds for the masses [CNBC]

For financial geeks, a do-it-yourself hedge fund site [Reuters]

A hedge fund investing in soccer stars [Bloomberg]

Hedge fund superstars earn extreme wealth through increasingly scalable tech [HFI]

Major Vivus shareholder to support activist's slate [Hedgeworld]

Dubin gives up CEO role at Highbridge Capital [WSJ]

For readers down under: John Hempton's Bronte Capital is hiring [Bronte]

John Burbank's Passport Capital Boosts VIVUS Stake

John Burbank's hedge fund Passport Capital has filed a 13G with the SEC regarding shares of VIVUS  (VVUS).  Per the filing, Passport has disclosed a 8.5% ownership stake in VVUS with 8,552,929 shares.

This marks a 5% increase in the amount of shares owned since the end of the second quarter.  The disclosure was filed due to portfolio activity on October 23rd.

Burbank's Thesis

We've heard rumblings that Burbank pitched VVUS at the Excellence in Investing conference in San Francisco the week prior and he believes it is a takeout candidate for big pharma.  He's pointed to the company's obesity drug which he thinks will be very important.   VVUS is said to represent around a 5% position for his fund.

Per Google Finance, VIVUS is "a biopharmaceutical company. The Company is engaged in the development and commercialization of therapeutic drugs for underserved markets, including obesity and related morbidities, such as sleep apnea and diabetes, and men's sexual health."

In the past, we've also pointed out how Passport likes Saudi equities.

Why Passport Capital Likes Marathon Petroleum (MPC) & Top Equity Positions

John Burbank's hedge fund firm Passport Capital talked about their rationale for owning Marathon Petroleum (MPC) in their year-end letter.

Marathon Petroleum (MPC)

Passport writes, "Marathon has an $11.8 billion market capitalization and an enterprise value of $12.2 billion. We expect the company to generate $3.9 billion in EBITDA in 2012 and free cash flow (FCF) of $1.5 billion, for roughly a 14% FCF yield.

During the quarter, the company raised their quarterly dividend from $0.20/share to $0.25/share, resulting in approximately a 3% dividend yield at year end. During its first analyst day in December, the company emphasized its highly experienced management team, cycle-tested business model, unique integrated asset base, and sound financial position. MPC also emphasized organic projects in 2012 that could increase access to discounted crudes and increase yield of higher margin products like distillates. Their Detroit refinery upgrade (expected by the end of 2012) was reported to be on schedule and budget.

While the fourth quarter was weaker than originally expected given the decline in the Brent/WTI spread, it is typically the weakest quarter of the year. Importantly, the decline in the Brent/WTI spread does not impact our free cash flow estimate for 2012, which provides a yield of 14% and remains unchanged despite the decline in the spread."

So what other funds own Marathon Petroleum? Barry Rosenstein's JANA Partners is the second largest owner of MPC shares after assembling a massive new position in the fourth quarter.


As of December 31st, here were Passport's Top Ten Equity Positions:

1. Marathon Petroleum (MPC): 5% of NAV
2. Liberty Interactive (LINTA): 4%
3. Cytec Industries (CYT): 3%
4. Thoratec (THOR): 3%
5. Tarpon Investimentos (TRPN3.BZ): 2%
6. Cie Financiere Richemont SA (CFR.VX): 2%
7. Vivus (VVUS): 2%
8. C&J Energy Services (CJES): 2%
9. Priceline.com (PCLN): 2%
10. WebMD (WBMD): 1%

You can view an equity analysis of Priceline.com in the brand new issue of our Hedge Fund Wisdom newsletter.

Also, we recently highlighted why Carl Icahn likes WebMD as well. Lastly, you can watch John Burbank's interview with Bloomberg where he talks about why he likes VVUS and why he thinks 2012 is a stockpicker's market.

For more of the hedge fund's commentary, we've also posted up why Passport Capital likes Liberty Interactive (LINTA).

Passport Capital's John Burbank: 2012 is a Stockpicker's Market

John Burbank of $4 billion hedge fund Passport Capital recently sat down with Bloomberg TV to discuss his outlook on the markets and oil, among other things.


On Why This is a Stockpicker's Market

The founder touched on his fund's strategy for those looking for more insight into his ways:

"We’re stock pickers. In fact, this is a great year to be long and short individual securities. In 2008, everything went down. In 2009, everything went up. In 2010, everything moved together and eventually ended up. Last year, things started separating. Our strategy is to be picking individual securities, companies that are not depending on economic growth.”

You can see Passport Capital's latest equity holdings in the brand new issue of our Hedge Fund Wisdom newsletter that was just released.


On Healthcare & Biotech

He also went on to say that, “Biotech and healthcare is one of those sectors. There hasn't been an obesity drug approved in over 30 years and we thought QNEXA would have a good chance of being approved…We were one of I think four big holders in the stock. We think it can double again because we think a large pharma would probably like to own the company at some point."

QNEXA is the drug made by VIVUS (VVUS). In addition to Passport, large holders of the stock at the end of Q4 were Caxton Associates, Citadel Advisors, D.E. Shaw & Co, and SAC Capital.


On Oil

Burbank also addressed some macro topics like oil. "[Oil] is up 16%, more than any of the indices. It's a big problem for the rest of the world - central bank easing and liquidity providing presents a lot of problems for the average consumer here but also for emerging markets around the world.”

Burbank also mentioned where he has allocated a sizable portion of his capital:

“The one market it really helps is the Saudi market. We have 15% of our capital in the Saudi market - only about 1% is held by foreigners. It should be opening up this year. So we think unfortunately QE3, which is now being pursued in Europe and Japan, essentially in the U.S. with other programs, has negative feedback loops. And oil we think is the one. Gold goes up 10%, 20%, 50%, it doesn't cause any problems with people the way banking is done these days, but oil does… I don't think oil is going to stop until the economy breaks which is a real risk."

Embedded below is the video of John Burbank's interview with Bloomberg TV: