Passport Capital Ups Habit Restaurants Stake

John Burbank's hedge fund firm Passport Capital has filed a 13G with the SEC regarding shares of Habit Restaurants (HABT).  Per the filing, Passport now owns 5.6% of HABT with 1 million shares.

This is up from the 429,257 shares they owned at the end of the second quarter.  The filing was made due to activity on August 22nd.

For more from this manager, we've previously posted up notes from Burbank's talk at the SALT Conference.

Per Google Finance, The Habit Restaurant is "a fast casual restaurant company. The Company is engaged in preparing made-to-order char-grilled burgers and sandwiches featuring tri-tip steak, grilled chicken and sushi-grade albacore tuna cooked over an open flame. In addition, it offers salads, sides, shakes and malts. The Company prepares its burgers with char-grilled preparation, topped with caramelized onions, melted cheese, lettuce and tomatoes. The Company's Char burgers menu includes Double Char burger, Mushroom Char, Teriyaki Char burger, BBQ Bacon Char Burger and Santa Barbara Style. Its Sandwich menu includes Chicken, Tri-tip, Albacore Tuna, Veggie burger, Chicken club and Pastrami. The Company operates at over 140 locations in over 10 markets in approximately nine states. It operates a variety of restaurant formats, including end-cap, free-standing, inline and drive-in, primarily within suburban shopping centers and retail settings."

SALT Conference Notes 2016: Griffin, Cooperman, Burbank, Chanos & More

The Skybridge Alternatives Conference, better known as the SALT Conference, is taking place in Las Vegas this week.  It's a multi-day affair with many speakers on a broad range of subjects.  We've condensed notes into primarily finance/investing thoughts from various hedge fund managers and investors below.


2016 SALT Conference Notes


Ken Griffin (Citadel):  Talked about how he built Citadel and the importance of culture at an organization.  'Avoid marrying a strategy' and instead focus on building a platform with the best people.  Business really taught him how to delegate and manage people.  On finding good talent: you've gotta be able to sell them on why they should leave and come to you.  You have to go out and find that talent instead of waiting for them to come to you.  The ones that 'knock on your door' aren't the best.  One interesting quote:  "Who is the number five manufacturer of personal computers?  Who cares?  We're in a more and more winner take all world."


Leon Cooperman (Omega Advisors):  He talked about a trend of investors moving from active to passive strategies and says that hedge fund performance can't really justify the fees these days, so fees need to come down.  He said that long-term (i.e. 'permanent') capital is doing good because they don't have to worry about lockups (citing Warren Buffett).  The other winner has been quant strategies.  Pitched the stock First Data (FDC) which recently IPO'd.  Says he's got around ~20% of his fund in structured credit at the moment.  Reiterated his belief that conditions for a recession are not present (a concept he's talked about for a while now).  Thinks the bubble is in fixed income.  Government bonds are a bad idea.  Likes Tetragon Financial, yields 7%, dividend coverage of 4x.  Buying a stock trading at half of book.


Kyle Bass (Hayman Capital):  Implied that investors need to lower their return expectations over the next few decades (5% global real return expectation).  Also agreed that fees for funds need to come down.  Says it's much harder to maintain investors than it is conviction.  Thinks we're in the early part of '07 in terms of credit/equity markets.  Says a hard landing in China is happening as we speak. Argues that China credit system is one of the biggest macro imbalances, something has to give sooner rather than later.  Hong Kong real estate is collapsing.


Roslyn Zhang (China Investment Corp):  Sovereign Wealth Fund.  Disappointed with hedge fund performance.  Compared Chinese retail investors to hedge fund herding.  Criticized those betting against the Chinese Yuan.  Argued that China's economy is still strong and that all of the building is due to the massive population; supply can be absorbed.


Sam Zell (Equity Group Investments):  Cost of regulation has gone up around 5x over the last decade.  Have been big investors in Brazil, Far East, Mexico. 


Ty Wallach (Paulson & Co):  Thinks specialty pharma stocks are oversold.  Specifically pointed out Valeant Pharmaceuticals (VRX) bonds.  Bought at 80cents on the dollar and says the co still has $10bn in equity value.  Could sell one of the many companies they've acquired if they need to cover debt payments.


Jeff Smith (Starboard Value): Activist investor.  Says settled with Yahoo (YHOO), put four new members on the board.  Notes the parts of the company are worth more than where its trading.  Core biz with $4bn in revenue, huge stake in Alibaba, Yahoo Japan, add it all up and it's more than the current market cap.  Said 'we're friendly but no one describes us as passive.'


Scott Ferguson (Sachem Head Capital):  Sold out of Zoetis (ZTS).  We noted how Pershing Square was also selling ZTS recently.  Ferguson was the one that brought the idea to Ackman to begin with (he used to work at Pershing).  Talked about how to change leadership and achieve things on behalf of investors: "Money's a great way to effectuate things" i.e. severance for getting rid of a CEO.  Says things are easier for activists these days and companies are more likely to engage. 


Clifton Robbins (Blue Harbour Group):  Activist investor.  Owns 10% of Investors Bancorp (ISBC), says it's trading at a discount to peers.  Also talked about Xilinx (XLNX), a net-cash semiconductor play; says they have some ideas as to how to utilize the balance sheet.


Michael Lewis (Author of Flash Boys and The Big Short):  Said he was surprised that both Moneyball and The Big Short were made into movies.  Said Christian Bale was dead-on with his interpretation of Michael Burry after just spending some hours with him.


Richard Chilton (Chilton Investments): Sherwin Williams (SHW): makes premium paint and coatings.  Says the company's purchase of Valspar was years in the making and they can repay the price with free cashflow in about 5 years.  Thinks there's a lot of synergies and margin overlap.  SHW does higher margins in paint/consumer and VAL does better margins in industrial coatings.  "You can't buy paint online."


John Lykouretzos (Hoplite Capital):  Takes a bit of an issue with the 'oligopoly' theme of airlines, saying it's still a competitive industry with margin pressure.  Bearish on the industry.  Main threats: excess capacity, union labor wage hikes, and of course higher oil prices.  Says that low cost carriers (LCC's) have basically destroyed the chance for legacy airlines to become a true oligopoly.  Thinks American Airlines (AAL) is the most compelling short play there.  Has some of the highest costs & exposure to rising oil.  High leverage.  Weakest FCF generation of the group.  Thinks that Southwest Airlines (LUV) can still add capacity even at higher oil prices (~$80 or so) and still generate high IRR.


John Burbank (Passport Capital):  Says China won't let outside companies 'win' especially Facebook.  "It's a hard place to win if you're not Chinese."  (While he didn't mention it, just look at Amazon's failed venture there as well).  Burbank owns Tencent (700.HK) with short Chinese Renminbi as partial hedge.  Thinks it isn't as much of a crowded trade as Facebook (FB) is.  His slide also said "Short FXI: Hedge out 'Old China' country-specific risk with China large cap ETF."


Jim Chanos (Kynikos Associates): Still short Cheniere Energy (LNG), calling it a 'pipe dream' and very expensive to peers.  Trades at 11-12x EV/EBITDA using "base case" 2021 EBITDA of $2.1bn.  Peers trading between 5-7x 2020 EBITDA.  Also commented on Alibaba (BABA) saying their accounting is dubious and that you don't really know what they're earning, calls it some of the most questionable he's ever seen. Chanos also recently talked about some of his short positions at the Sohn Conference.


For other recent hedge fund manager thoughts, head to our notes from Sohn Conference New York 2016.

Passport Capital Updates Hortonworks Stake

John Burbank's hedge fund firm Passport Capital has filed an amended 13G with the SEC regarding its stake in Hortonworks (HDP).  Per the filing, Passport now owns 12.7% of the company with over 7.18 million shares.

This is up from the 1.7 million HDP shares at the end of 2015.  The latest filing was due to activity on February 29th.

Per Google Finance, Hortonworks is "a provider and distributor of an enterprise-grade Hadoop solution called the Hortonworks Data Platform (HDP). The Company's platform integrates with data center technologies to enable data architectures and enables its customers to collect, store, process and analyze existing and new data types in a way that augments rather than replaces their existing data center infrastructure. It provides support subscription offerings and related professional services around the HDP, which is its open source software distribution of Apache Hadoop and associated projects. Its products include Hortonworks Data Platform and Hortonworks Sandbox. Its range of professional services are training and consulting. It caters to vertical markets, including online services, education, financial services, Government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology and telecommunications.."

Passport Capital Ups Hortonworks Stake

John Burbank's hedge fund firm Passport Capital has filed an amended 13G with the SEC regarding its stake in Hortonworks (HDP).  Per the filing, Passport now owns 12.2% of the company with over 6.66 million shares.

This is an increase over the 1.7 million shares Passport owned at the end of 2015.  The filing was made due to activity on February 29th.

Per Google Finance, Hortonworks is "a provider and distributor of an enterprise-grade Hadoop solution called the Hortonworks Data Platform (HDP). The Company's platform integrates with data center technologies to enable data architectures and enables its customers to collect, store, process and analyze existing and new data types in a way that augments rather than replaces their existing data center infrastructure. It provides support subscription offerings and related professional services around the HDP, which is its open source software distribution of Apache Hadoop and associated projects. Its products include Hortonworks Data Platform and Hortonworks Sandbox. Its range of professional services are training and consulting. It caters to vertical markets, including online services, education, financial services, Government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology and telecommunications.."

John Burbank's Sohn London Presentation: Long CF Industries

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Passport Capital's John Burbank who pitched a long of CF Industries (CF).


John Burbank's Sohn London Presentation 2015

Long CF Industries (CF) 

Burbank said that he is generally very bearish on commodities but he likes CF industries for the following reasons.

- They know CF well and have been researching them for at least two year’s.

- CF is the leader in nitrogen fertilizers. The nitrogen fertilizer business is better than the potash business because farmers have to apply it to the soil.

- CF made two good deals in 2015. CF is buying OCI which is listed in the Netherlands. It will give CF a 50% share of the US nitrogen fertilizer business.  Owning a large share of the market will allow CF to charge higher prices. Buying Netherlands based OCI enables a tax inversion which will reduce CF’s tax rate from 35% to between 20-25%. The CF OCI deal should close in mid-2016. The other good deal that CF has done in 2015 is to allow its largest customer, CHS Co-Op, to buy 9% of it shares at $107/ share or $2.8bn. That’s more than double the current stock price. Burbank thinks that CF will use the money to buy back stock. He also believes that analysts have been slow to recognise that the deals will lead to 25% extra product capacity.

- CF is a shareholder friendly company with a long history of share buybacks. Capital returns in dividends and buybacks have been running at 10% per year since 2011. They have reduced the shares by 35% since 2012. Executives are net buyers rather than net sellers of the stock.  Burbank said that CF stock may not do anything for the next four to five months. Then the deals will close, the big buyback will happen and the stock price will go up.

What can go wrong? Burbank thinks that China will devalue. “If China devalues everything in the World will go down in value.” CF’s earnings will get hit too by about 7%. Passport has bought CF against a basket of commodity shorts. They are hedging the downside risk in non-miner, CF, by being short potash miners like Potash Corp (POT), Mosaic (MOS) and Agrium (AGU).

Be sure to check out the rest of the Sohn London Conference presentations.

John Burbank Long CF Industries: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is John Burbank of Passport Capital.  He pitched a long of CF Industries (CF).


John Burbank's Invest For Kids Chicago Presentation

•    Pitching CF Industries (CF).
•    Biggest position for two years.
•    One of the few commodity equities he wanted to be long.
•    Remains bearish on commodities.
•    Located for 30 minutes from Chicago for just for another quarter, did a merger.
•    Stock traded down 30% off the deals.
•    First was a purchase of OCI. 60% of nitrogen fertilizer capacity in USA/5% global market share.
•    USA is the Saudi Arabia of Natural Gas.
•    $2 gas margins over 50%.
•    Went to $70 in early July, ended at $45 by September.
•    CF to exchange $7.4B of stock and assumed debt and cash for OCI NA and European nitrogen/methanol facilities. 2016 close data. Enables a tax inversion.
•    Over-levered copper companies which are going to zero rising 50%, yet stuff like CF dropping doesn’t make sense.
•    HSR approved yesterday and the stock dropped, not understood by the market.
•    By February should be closed.
•    CHS Co-Op – sold a minority stake at a premium. CHS canceled a 3.1BB nitrogen plant. Instead will invest 2.8B in CF for 9% of CF’s pre OCI deal production.
•    Deal values CF equity at ~$107.
•    Combined market cap of $17B. 3-5B of EBITDA post deal.
•    Cash flow from ops after mcapex of $1.8 to 3.2B.
•    Product capacity of 25.1MM short tons.
•    Will use FCF to return to shareholders.
•    Take five years to build capacity so nothing to do with money.
•    CF is not a mining company.
•    Short Mosaic (MOS), Potash (POT), Agrium (AGU), K&S as a hedge. Negative on markets and commodities.
•    Also is long USD.
•    CF is 8th best performing stock over the past ten years behind apple.
•    EPS 5.5-6 dependent upon corn yields.
•    Street doesn’t understand this industry or the OCI deal.
•    Passport has an analyst with a Dow/GE background tracking this. Good edge.
•    CF has returned 11% of its market cap annually to shareholders, bouht back 35% of company since FY12. 2.3% div yield. Will probably buy abck more stock.
•    Sold phosphate biz (not great) to Mosaic.
•    Executives are buyers.
•    Will return $12Bn to shareholders over next four years. Mcap is 17B.
•    Can’t buyback stock now until deal closes.
•    Buybacks based upon flat prices.
•    Thinks commodity prices going down, USA might go into something that feels like a recession. Shouldn’t own most stocks. Want something confident in liquidity and management.
•    Trade long CF / short 2/3 MOS and 1/3 POT as a pair.


Check out the rest of the presentations from Invest For Kids Chicago 2015.

John Burbank Lecture at UC Berkeley Haas - Invest In Things That Have Never Happened Before

Passport Capital's John Burbank earlier this year gave a talk at UC Berkeley Haas that's well worth your time watching.  In it, he lays out Passport's approach of combining three different types of investing: macro, fundamental, and quant.

He notes that all risk is backwards looking and hedging is for regression to the mean. 

He presented a concept that "Price is a liar."  He argues that, "Price means nothing other than the equilibrium of liquidity."  Counter that with the typical thinking that "Price is all the information that exists in the market."

He says that when something new happens it takes yeas for all the liquidity in the world to discount that thing

Burbank went on to say: "Do not imagine you know where we are in 2019.  The market doesn't, it has no idea."  That said, he laid out his best guesses for the next 5 years: low global growth, leading equities over fixed income, US over emerging markets, stronger dollar, favor quality & liquidity, innovation & governance win.

His longs have been positioned to benefit from a stronger dollar while his shorts the opposite (foreign companies that have borrowed in dollars, commodity exposed companies, etc.)  The Passport managers also feels that yields are going lower.

Burbank's talk is intriguing and thought provoking.  He also echoes another salient point that other investors have highlighted: you have to match your investing style to your personality.

Embedded below is the video of Burbank's talk at Berkeley:



For more from the Passport manager, head to Burbank's presentation at the SALT conference from earlier this year.

SALT Conference Best Ideas Panel: Chanos, Bass, Burbank, Cooperman, Karsch

At the Skybridge Alternatives (SALT) Conference in Las Vegas, the best ideas panel featured top hedge fund managers giving their top stock picks.  Here's a summary:


SALT Conference Best Ideas Panel: Chanos, Bass, Burbank, Cooperman, Karsch

Jim Chanos (Kynikos Associates):  Short oil integrators.  Specifically, short Royal Dutch Shell (RDS), doesn't like the merger with BG.  Short Chevron (CVX) as well due to their liquefied natural gas (LNG) challenges.  He also summed up Brazil's Petrobras (PBR) by saying they're "lying, cheating and stealing."  Also check out Chanos' SALT interview we posted earlier.


Kyle Bass (Hayman Capita): Long Perrigo (PRGO).  Doesn't think they get bought out by Mylan, but thinks someone else acquires them.  "We're short enough pharma."  Bass' separate new fund has been challenging pharma patents and says the industry is ridiculous as prices of drugs have spiraled out of control.  He gave the example of Mylan's (MYL) epipen drug specifically.  Says 13% of the company's revenue comes from this drug (which came off patent back in the 1950's).


John Burbank (Passport Capital): Long NCB AB, a Saudi Arabian banking play.  "The banking giant you've never heard of in the country you're too scared to invest in."  He says the vast majority of deposits don't pay interest due to Sharia Law so they'll be in a good position when rates rise.  Harps on the fact that outsiders are going to be able to invest in Saudi and by 2017 90% of investors will own some part.  "All the risks are already known in Saudi."  This isn't a new theme from him as Burbank has pitched Saudi investments in recent years.


Lee Cooperman (Omega Advisors): As he has been for a while now, he again advised reducing fixed income exposure.  He also said to go short on any rally if you're adventurous. His stock picks were the same as his Sohn Conference picks: ACT, AER, C, DOW, GM, GOOGL, PCLN.


Michael Karsch (Hunter Peak Capital): Long NOS SGPS, a Portuguese cable/wireless provider.  Biggest cable play and #3 wireless provider in the country, a hidden gem.


For more from the SALT conference, check out Dan Loeb's talk.

Passport Capital Reduces 58.com (WUBA) Position

John Burbank's hedge fund firm Passport Capital has filed an amended 13G with the SEC regarding their stake in 58com (WUBA).  Per the filing, Passport now owns 5.1% of the company with 2 million shares (held via 1 million ADR shares).

This means they've reduced their position from 1.6 million ADR shares at the end of December.  The filing was made due to activity on March 28th.

Chinese internet companies have been a big portfolio theme for Passport as of late.  We originally disclosed Passport's WUBA stake in November.

WUBA has sold off from a high of $58.89 down to as low as $36.86 over the past month.  Shares have since rebounded back to $45.26.

Per Google Finance, 58.com is "a holding company. The Company is an online marketplace serving local merchants and consumers in China through its Website www.58.com and mobile applications. Its online marketplace enables local merchants and consumers to connect, share information and conduct business. The Company’s online marketplace contains a range of information in approximately 380 cities, across diverse content categories, including housing, jobs, used goods, automotive, pets, tickets, yellow pages and other local services. Its online marketing services include listing services, such as real-time bidding and priority listing, and marketing services through collaboration with third-party Internet companies in China. The listings on its online marketplace cover a range of content categories, such as housing, jobs, used goods, automotive, tickets, homecare and relocation, renovation, wedding, business services, travel, education, food, beauty, entertainment, franchise, and other local services."

Passport Capital Discloses 58.com Stake

John Burbank's hedge fund firm Passport Capital has filed a 13G with the SEC regarding shares of 58.com Inc (WUBA).  Per the filing, Passport now owns 11.8% of the company with 2,821,526 shares (via 1,410,763 ADR shares).  The filing was made due to activity on November 1st.

Per Yahoo Finance, the company "Beijing 58 Information and Technology Co., Ltd. owns and operates an on-line classified advertisement services Web Site under the name 58.com. The Web Site helps individuals and SMEs to broadcast and search information relating to job opportunities, housing, dating, community events, services, and trading of second hand products. Beijing 58 Information and Technology Co., Ltd. was founded in 2005 and is based in Beijing, China."

For more from this hedge fund, head to John Burbank's thoughts at the Excellence in Investing Conference, as well as Burbank's comments at the Alpha Hedge West Conference.

Notes From Excellence in Investing San Francisco 2013: Burbank, McGuire, Billick & More

The 4th annual Excellence in Investing: San Francisco conference took place this week and MarketFolly was there to cover the event.  Excellence SF partners with the Sohn Conference Foundation and is dedicated to the support of education and other children's causes.

It's not too late to make donations and here's a link to do so,  The success of the event has grown over time and this year marked record attendance.  Since inception, more than $1 million has now been raised in support of these causes.


Notes From Excellence in Investing: San Francisco 2013


John Burbank III -  Passport Capital

Idea: Long Digital Garage (TYO:4819) 

Thesis:  Things seem frothy now.  Like plays linked to innovation.  The QE fueled rally is likely coming to an end.  Stay away from growth coming from and derived from QE.  Tech is less sensitive to GDP.  Innovation is not EM activity, it is DM activity.  In Japan Abe says follow Abenomics.  Likes Digital Garage.  It has around a 20% stake in Kakaku (TYO:2371).  Owns small stake in Twitter (possibly $100M).  CEO owns 14% of the company.  Stock just split.  Thinks it has a 22% upside to current value PLUS optionality on the future.  Can hedge out Kakaku if you want given that company's high valuation.   Burbank also recently had a macro discussion with Kyle Bass that we've posted as well.


Kurt Billick -  Bocage Capital

Idea: Long Domestic Oil Refineries (specifically Tesoro (TSO) & Marathon Petroleum (MPC))

Thesis:  Likes Malcolm's presentation on CF (below) as his idea has a similar theme, but with refineries.  North American oil business was thought of as mature and in structural decline.  Gulf coast's ability to refine oil will be overwhelmed with supply.  Discount in price of oil for US refineries is less than that of all of the margin for many refineries in rest of globe.  Other advantages are processing costs lower due to cheaper natural gas and financial arbitrage.  Likes all refineries (ALJ, DK, HFC, MPC, PBF, TSO, VLO and WNR).  His favorites are Tesoro (TSO) and Marathon Petroleum (MPC).  TSO is still in early stages of getting discounted crude.  Dan Loeb's Third Point has also written their thesis on TSO in a past letter.  MPC is a recent spinoff with management just now getting in tune with running as a standalone refiner.   Billick also recently appeared on a best ideas panel at another conference that you can read about at that link.


Mick McGuire -  Marcato Capital Management

Idea: Long Sotheby's (BID) 

Thesis:  Owns 7% of the stock.  These are their first public comments regarding the investment.  Capital has not been allocated well.  Core business is good.  Lots of opportunity to unlock value of real estate.  There are under-utilized assets.  Thinks stock is worth $68 which is more than 30% above current price.  One of two major auction houses with Christie's.  Has been falling behind Christie's in some areas.  Opportunity for improvement there with the income statement.  Regarding the balance sheet, opportunity to unlock value with the real estate holdings.  They've been growing the lending business with after tax profits from the auction business.  Instead they should be funding this with other facilities like securitization or receivables.  Dealer segment not big, but performance there is symbolic of poor capital allocation.  $1.3B in trapped equity with poor opportunities for reinvestment.  This money should be returned to shareholders through buybacks, etc.  You can view McGuire's slideshow presentation on Sotheby's here.  


Mason Morfit -  ValueAct Capital

Idea: Incentive Based Investing

Thesis:  Many companies have perverse incentives in place right now.  He prefers to reward to performers, not caretakers.  One of the problems with financial metric based performance is that management sets targets.  They have implemented changes at Valeant Pharmaceuticals (VRX) and Adobe with significant increases in price after the changes.  Note that ValueAct recently trimmed their ADBE stake.


Christopher James -  Partner Fund Management

Idea: Long Adobe (ADBE) 

Thesis:  Mobility is impacting marketing and advertising.  Spending is migrating to mobile, social and online marketing.  Emergence of "Marketing Cloud".  Closed Loop Marketing... key players are becoming SalesForce (CRM) and Adobe.  Both are focusing on this trend and building platforms and making acquisitions to establish dominant platforms.  Adobe has been moving from traditional software model to SAAS.  Better economics with this newer model as acquisition costs are low and renewals are high.  Thinks they can do $3 in FCF in 2015 and $4 in FCF in 2016. 


David Herro - Harris Associates

Idea: Long Select European Equities (Credit Suisse, BMW Group, Diageo) 

Thesis:  Looks for opportunities from Mr. Market where price is significantly below intrinsic value.  Use a discounted cash flow model to calculate intrinsic value.  Likes European equities.  Fixed exchange rates caused distortions.  Very different micro-economic policies by country in EU create bottlenecks to adjustment.  Unit labor costs in Europe declining.  Debt yields are dropping.  Competitiveness is increasing.  Europe trades at a discount.  Consider European companies based there, but with global or US reach.  Europe is good at luxury.  Likes Credit Suisse as it is trading at less than 10 times normalized earnings.  BMW Group has over 20% of profit from China.  EV to EBITDA is less than 6.  Weathered the recession very well.  Diageo (DEO) is the world's largest premium spirits and beverage company.  Yield is over 3%.  Great business for the long, long term.  


Malcolm Fairbairn -  Ascend Capital

Idea: Long CF Industries (CF)  

Thesis:  Based largely on dynamics relating to natural gas and nitrogen.  China is the largest producer and user of NatGas.  Nitrogen demand growing 2% a year.  Futures suggest price doesn't break $5 until 2020.  CF benefits from low prices.  CF has leading margins but trades at discount to peers.  Recently increased dividend.  Thinks price could be $250 based on the peer group's 3.8% yield with a 50% earnings payout.   We've also posted Third Point's thesis on CF from their past letter.


Christopher Lord -  Criterion Capital Management

Idea: Long Tower Companies (American Tower (AMT), Crown Castle (CCI) and SBA Communications (SBAC)) 

Thesis:  Last years pick was Google.  Things look frothy now.  Likes "Towers".  Seen a 35x increase in mobile traffic the last six years.  Estimates the increase will have been 430x for ten year period ending 2017.  Towers are winners.  The US is going from 2 top cell carriers to 3 or 4.  Tower companies build towers and cell carriers pay most of the other costs.  These businesses can't be replaced.  Best real estate is already taken.  There are also restrictions on new towers.  Contracts also have automatic price escalators.   Given that models have high operating leverage, much of the price increases go straight to bottom line of the towers.  Picks are AMT with a target of $110, CCI with a target of $100, and SBAC with a target of $110.  Right now these companies are trading at lower multiples to other types of REITs, but they have higher growth rates.  Bonus thoughts: likes shorting 3D printers, Cree (CREE), SAAS Cloud Companies trading at greater than 20x Revenues, Cisco (CSCO), EMC (EMC), VM Ware (VMW).


Brian Zied -  Charter Bridge Capital Management

Idea: Long Brunswick (BC) 

Thesis:  Charter Bridge runs a long/short fund.  Prior to founding the firm, Zied was at Maverick Capital.  He focuses on consumer driven small and mid-size businesses.  Brunswick focused on Marine, Fitness, Bowling and Billiards.  Strong in engine business.  Attractive investment with many ways to win (depressed boat cycle, marine innovation, restructuring opportunity).  There is a 40 year history of boat sales.  For a long time new boat sales were between 300K and 500K boats a year.  Boat cycle was at 120K at the bottom of recession, now at 150K boats a year.  Participation in boating is at an all-time high.  Boats have a 25 to 30 year life.  There are 200K boats being scrapped per year.  Obviously, these trends are going to run in to each other with new boat sales rising.  Revenues still haven't come back from pre-crisis levels.  Innovation in GPS sky hook anchoring and joystick controls.  Precrisis boat revs were greater than $2B, now only at $1B...the recovery is inevitable.  Typically new boat sales are 25% of annual boat sales, right now they are only 16%.  Largest position in their portfolio.  Brunswick is currently at 7.4x EBITDA and 14.9x PE whereas most peers average 10.5x EBITDA and 17.4X PE.  Sees a free call option with 50% to 80% upside.


Carl Kawaja -  Capital Research Company

Idea: Long EADS (EAD) 

Thesis:  Flight is still a modern miracle that many don't appreciate.  Likes companies that solve problems.  Planes are BIG.  This business has a moat that won't get disrupted by three kids in a dorm room (like social media).  Majority of world flies less than once a year.  Air travel won't revert to mean, it will just continue to grow.  The business of airlines is getting better.  Fuel efficiency is driving sales of new planes and will increase profits for manufacturers.  Thoughts on valuation:  1) Earnings will grow... a lot.  Many of the upfront costs already incurred for R&D.  2) They will get more orders...addressable market is more than $1T with a $800B backlog.  Market cap is $51B... PV of future ops alone is worth more than $64B.  Sees stock doubling over time.


Michael Moe -  GSV Capital

Idea: Long Twitter (TWTR)  

Thesis:  From 1991 to 2000, there were 550 IPOs per year.  Following decade has seen an average of 113 IPOs per year.  Before market caps were around $100M at time of IPO, now they are on average over $1B.  This means VC firms must invest longer before firms go public.  In 2013, IPOs are performing very strong.  GSV is a public vehicle for VC stage companies.  Twitter is his idea.  They currently have a position in it.  It is 15% of the fund.  Ad growth of 124%.  There are 620 million shares outstanding.  At $25 a share the market cap is about $15.5B.  Positive cash flow the first half of 2013.  Participating in multiple trends including:  Social, Personal Branding, Mobile, Second Screen Watching TV, Next Gen Devices.  Mobile usage has now surpassed desktop usage.  Vine (Twitter owned) is #1 App.  Thinks it could go as high as $160 a share.  


Christopher Balding -  HSBC Business School  

Idea: Macro Call of Short China 

Thesis:  He's an Associate Professor of Finance and Economics at the HSBC Business School of Peking University Graduate School.  A lot of data from China is manipulated.  China is a huge bubble.  Example of bad reporting is growth numbers.  Growth reported from provinces aggregates to 10.8% growth whereas official GDP from China is 7.8%.  Another example: official CPI housing price inflation up 14% while real estate prices up 111%.  Price in income ratio for real estate in San Francisco is 9.4.  This seems high, but it is 32 in Shenzhen.  The official numbers say that steel companies in China have $500B in debt and only $300M in profits.  Would be very careful before simply taking financial and economic data at face value.  Banks in China are starved for capital right now.  There is risk dispersion.  2/3rds of the stocks in China have been really hurt while 1/3rd are trading at a premium.  Example is BYD trading at a P/E of 1,100.  If you don't want to short China directly, another option is shorting China derivative plays like companies in Australia heavily tied to China. We've also posted up Jim Chanos' short China thesis as well for those interested.


That wraps up notes from Excellence in Investing: San Francisco 2013.  For more coverage on top hedge funds, scroll through the hedge fund letters we've posted up recently.

Alpha Hedge West Conference Notes 2013

We're posting up notes from the 2013 Alpha Hedge West Conference that just took place in San Francisco.  There were numerous panels discussing various topics and summaries are available by clicking each link below:


Notes From the Alpha Hedge West Conference

- Macro Discussion: John Burbank & Kyle Bass on China, Europe, Japan, Argentina & More

- Navigating the Macro & Interest Rate Environment:  Bruce Richards (Marathon Asset)

- Best Ideas Panel:  Kurt Billick (Bocage Capital), Peter Lupoff (Grayco Alternative), Worth Gibson (Forest Hill Capital), Paul Twitchell (Whitebox)

- State of the Hedge Fund Union: Jason Huemer (Visium), Bruce Richards (Marathon), Philip Weingord (Seer Capital) 

- Condition of the Consumer & Challenges for Investors as Economy Expands: Joseph Brusuelas, Senior Economist, Bloomberg & Kristin Bentz, PMG Venture Group 

- On Hedge Fund Seeding: Rachel Minard, Jeffrey Cozad, Basil Williams, Jonathan Miles

- Opportunistic Credit Roundtable: Emanuel Friedman (EJF Capital), Andrew Springer (Marathon Asset), Ronnie Jaber (Carlyle Group), Avery Kiser (Neuberger Berman Alt)

- The Role of Volatility: Michael Schmanske (Glenshaw Capital), Christopher Cole (Artemis Capital), Zem Sternberg (Lake Hill Capital), Joe Reynoso (Reynoso Asset)

- Structured Credit: Richard d'Albert, Christopher Hentemann, Amin Majidi, Rajesh Agarwal

- Dynamic Investment Panel:  John Claisse, Joy Xu, Andrew Karsh

- Next Generation of Hedge Fund Managers: Michael Sedoy, Neal Shah, Valtura Capital, Mike Keough, John Rende

- Venture Capital Panel: Where Are They Investing And Why? Pat Grady, Chris Schultz, Ron Suber, David Girouard

John Burbank & Kyle Bass Macro Discussion at Alpha Hedge West Conference

Next up in our series of notes from the Alpha Hedge West Conference is the panel featuring a macro discussion between John Burbank of Passport Capital and Kyle Bass of Hayman Capital.  They touched on China, Argentina, Japan, and many other topics.  Below is their dialogue and JB = Burbank's comments and KB = Bass' comments.


John Burbank & Kyle Bass' Macro Discussion: Alpha Hedge West

KB> First part of taper will be easy.  Fiscal drag of moving Fed Funds from 0% to 3% will be large. 

JB> Does not think Fed policy changes unemployment.  Labor in China first, now technology have a great impact on unemployment.  Firms don't want to hire.  Structural unemployment issues will persist most of our lifetimes.  JB is shifting into equities.  Likes equities with good governance and high quality business.  Not bullish on GDP or global economy or US economy.  Credit got crowded last year.  Equity just getting started.  Companies have gotten very lean and efficient.  Emerging Markets (EM) have been struggling.  That was due.  Development Markets (DM) will outperform EM.  Not that US economy is great, just that US is quality.  As EM people grow, they will want more DM goods, not EM goods.

China

KB> Not investing in China now.  "Univestible" due to banks and shadow banking systems.  Staying away from India too.  Branded luxury and quality did well post crisis.  China has not adjusted from command and control.  Appears Chinal will work, but he think it won't (success is illusory at this point).  Sees restructuring.

JB> His portfolio has turned on its head since 2000 with the exception of internet companies.  Everything in China is rising.  EM and most commodities went up on the industrialization of China.  Won't happen again.  Short the mining companies.  Those businesses have bad economics except when times are really good. Chinese internet companies are winning over US internet companies in China because the Chinese government won't let the Chinese companies lose to US ones.  Internet companies in China at new highs are the ones you probably want to own.  Short EM and Mining.

Why does Bass like Argentina?

KB> People don't understand what is happening there.  Lots of things there are fixable.  Leadership in control has "issues" :).  Energy has been an issue, but recently there have been major energy findings that will change that.  2 years from now, he thinks there will be a new President in October 2015 and pro business people will be running things to take advantage of vast prairies of nature resources.  Argentina's problems can be fixed in 2 years.  Now is the time to start investing.  Sees 50% upside in the sovereign debt.

JB> Would not play Argentina's equities.  Tough betting on turnarounds.  Does not believe in value.  Believes in mispriced growth.  Kyle might be right about Argentina.

KB> "When I'm Right."

Burbank: Long Saudi / Short Russia 

JB> Likes Saudi...though their neighbors are a problem.  He is one of the best informed US investors re: Saudi.  95% of investors in Saudi are local traders. 

Moderator> Is there an opportunity for a paired trade with Saudi?

JB> Short Russia.  Saudi has been crushed.  Instead of easing, they tightened.  They've lagged.  No one wants to invest there.  Aramco would be the largest company in the world by a factor of 10 if it were a public company.  Saudi is like a 1990s EM story in a time capsule.  Dollar rally would crush EM.  Mining gets crushed without rise in commodities.  In '03 and '04 most wouldn't invest in EM.  Now they can't be talked out of investing in EM.  San Francisco is the opposite of EM.  EM has high volumes of low skilled labor.  SF has relatively high concentrations of high skilled labor.  Most people don't understand tech.  Transformational tech requires less capital than ever.  This means lower margins for others.  EM not capable of embracing technology.  SF is impervious to risks like weak GDP, interest rates, etc.  Tech has been camoflauged by rising prices everywhere.  New tech is where you want to be.  Those are "safe" strangely enough.  Investors don't even like to travel to SF.  That will change in the next 3-5 years.

Moderator> Are early stage private companies better investments for tech?

JB>Want to own "Venture Debt".  Low risk.  Even low tech does well.  Innovation premium starting to be revealed.  Want to just be in top 5 or 6 venture funds.  Look for services.  Google is 300B market cap.  Facebook & Twitter.  Not that many tech hedge funds.

Japan

KB> US Recapped.  EU is 3.5x more leveraged than the US.  At some point, debt will matter.  Has always eventually mattered the last 2000 years.  When debts are 24 times revenues you are finished, it is just a matter of when.  Hopes he is wrong.  More he looks, the more he thinks it will happen.  Sees it happening the next few years.  Avoid Europe.  US is 4.5x debts to revs.  Japan is 24.

JB> Dollar is better than Yen or Euro.  Better chance for dollar to rally than market is pricing in.  Chart of S&P to EM tracks closely to dollar chart.  Similar to US in late 90s.  Not because of strength, but due to quanlity and governance in US compared to elsewhere.  Likes Quality in US then betting on low quality of EM.  Believes in multi-year trends until something reaches consensus.  Then you have reversion to mean.

How should mutual funds feel about Macro risks?

KB> If I were long only, I would not be able to sleep at night.  A Japan crisi could not be contained.  It would have huge impacts.

JB> Joke: mutual fund managers happy as long as they beat the benchmark.  This is an era where you want to own the best.  In Silicon Valley it is like winner take all.  Not enough premium on best of breed.

KB> During the Tequilla crisis, Mexican equities down 90%, even with 10x appreciation, you just break even.

Be sure to check out the rest of our summary of the Alpha Hedge West Conference.

John Burbank's Passport Capital Starts Yelp Stake

John Burbank's hedge fund firm Passport Capital filed a 13G with the SEC revealing a brand new position in Yelp (YELP).  Passport now owns 6.3% of the company with 1,065,261 shares.  They filed with the SEC due to portfolio activity on January 25th.

Just a few weeks ago, we highlighted how Robert Karr's Joho Capital had been adding to its YELP stake as well, as hedge funds have been buying shares.

Per Google Finance, Yelp "operates a directory services and social networking website. Its online community provides information on urban city guide. The Company is based in the United States and its information helps people to find places to eat, shop, drink, relax, and play. It also operates a search engine for finding restaurants, dentists and hairstylists. It provides a space for feedbacks and reviews of people regarding their experiences with local businesses and services."

For more on this hedge fund, we've posted up previous Passport Capital portfolio activity here.

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.

John Burbank Says Go Long High Quality Stocks, Short Speculative Ones: Interview

Passport Capital founder John Burbank appeared on CNBC and gave his thoughts in an interview with David Faber from the Barefoot Economic Summit.  Burbank basically said that while he has a negative view on the economy, his trade is essentially to go long high quality stocks and short speculative companies.

Burbank believes there's essentially a 'lack of growth' not yet reflected in equity prices.  He doesn't think all parts of the US are in a recession yet, but we're "very close."  We've covered how Passport had been net short with their negative viewpoint.

He thinks that everyone buying dividend stocks and yield chasing has created a new dynamic.  Burbank said:

"My view is that after '08, all that government spending and central bank liquidity tried to push things back together and push everything up higher and for '09, 2010, and 2011, everything traded together.  Last year things started separating. 

You see the separation now and a recognition that we're not going to have the growth that we thought.  I call it the 'great separation.'  I think what's happening is that the really high quality, well managed, well governed dividend paying companies are going to be treated as an asset class that's priced off of these other available yield instruments.  While speculative companies, things that really need the economy to do well, things that aren't that well managed, that don't pay dividends etc, are going to stay poor.

I basically would be long high quality, leading companies which generally in the United States and then short speculative companies that rise into Fed announcements but then fall away."


Embedded below is the video from John Burbank's interview:



For more on this investor, we've also highlighted Passport's thesis on Saudi equities.

Identifying Opportunities in Emerging Markets: SALT Conference Panel with John Burbank

At the Skybridge Alternative Conference (SALT) in Las Vegas today, John Burbank (Passport Capital), Robert Koenigsberger (Gramcery), Karthik Sankaran (Covepoint Capital), and Christian Angermayer (Angermayer, Brumm & Lange Group) talked about identifying opportunities within emerging markets.


John Burbank argued that a recession was coming in the US in the second half of the year.  We've posted up Passport Capital's Q1 letter explaining why they're net short.  He acknowledges that it's not a popular belief, but he believes it's going to happen as markets will correlate and head lower.

He also advocated Saudi equities, saying that it's like India in 2003 as hardly anyone is investing there yet.  We've posted up Passport's Saudi equity theses as well.  Burbank additionally said a euro sovereign crisis is ahead.


Robert Koenigsberger talked about how the BRICs are overbought (Brazil, Russia, India China).  Also, even though investors usually find volatility and downtrodden markets as potentially good places to invest, he thinks it's too early to invest in Europe.


Karthik Sankaran pointed out India and China as the most interesting emerging markets.  He also likes interest rate plays.


For more notes from the SALT Conference, check out:


-  Notes from panel with Kyle Bass, Dmitry Balyasny & Steven Tananbaum


- Barry Rosenstein, Leon Cooperman & Joel Greenblatt's panel on stocks


- Risk panel with Phil Falcone and Eric Sprott



The above was compiled from notes sent in along with help from live tweets from: @ldelevingne , @pdmckenna ,  @AttainCapital & @realrobcopeland

Passport Capital's Top 10 Holdings & Saudi Equity Theses: Q1 Letter

Today we're highlighting commentary from Passport Capital's Q1 letter to investors.  We've already highlighted how Passport is net short and so now we want to shift focus to John Burbank's top longs.

Passport's Top 10 Holdings (at end of Q1)

1. Vivus (VVUS US): 5% of NAV
2. Cytec Industries (CYT US): 4%
3. Marathon Petroleum (MPC US): 4%
4. Yanbu National Petroleum (YANSAB AB): 4%
5. Etihad Etisalat (EEC AB): 4%
6. Google (GOOG US): 3%
7. Liberty Interactive (LINTA US): 3%
8. Apple (AAPL US): 3%
9. Saudi Basic Industries (SABIC AB): 2%
10. Wynn Resorts (WYNN US): 2%

Comparing the above longs to their list at the end of 2011, there are a few noticeable changes.  Their stake in Vivus has climbed from 7th largest holding to their top position.  We had previously detailed how Passport was bullish on Saudi equities and you see that reflected now in their latest portfolio. 

US tech giants Apple (AAPL) and Google (GOOG) weren't included in their 2011 year-end top 10 but both make the list now.  As of March 31st, their top 10 equity holdings accounted for 34% of the fund's net asset value.


Passport's Investment Theses on Saudi Equity Plays

Given that many of their top holdings are now plays in Saudi equities, we thought it prudent to highlight some of their rationale for owning them.

Yanbu National Petrochemical:  John Burbank writes, "Our rationale for investing in YANSAB is predicated on the company’s strong cash-generating capability.  The company has a highly advantaged feedstock position in Saudi Arabia, allowing it to generate  EBITDA  margins  in  excess  of  45%  and  FCF  yield  of  over  10%.    YANSAB  is  a  single  petrochemical  plant commissioned in 2010 with no plans for further expansion and we believe is likely to pay out all its  cash once its debt covenants are fulfilled.  Over FY2011, the company decreased its long-term debt by  over 30% with Net Debt/EBITDA now at 2.7x.  We think YANSAB’s 51% shareholder SABIC could  start paying out dividends in the 2H of 2012, which should significantly re-rate the stock."


Etihad Etisalat: Passport's founder notes that, "Etihad Etisalat operates under the brand name Mobily, is the second largest mobile operator in Saudi,  and is a key beneficiary of the deregulation of the Saudi telecom sector.  Earnings have grown at around  48.7% CAGR in the last five years.  Mobily is capturing the growing data market (currently 22% of  revenue) due to what we believe are superior data services infrastructure compared to the competition.   In addition, Mobily is currently the leader in mobile broadband.  This segment is growing at an  exponential rate due to increased use of mobile tablets and 3G-enabled phones by the affluent Saudi  population (~60% of whom are below the age of 30).  Due to very high mobile penetration rates in the  Kingdom, Mobily is transforming from a high-growth company to a dividend opportunity given its SAR  4.25 FCF/share."


Saudi Basic Industries Corp:  The hedge fund's thesis on this name is that, "SABIC is the largest petrochemical company in the world by market cap and among the top five in terms  of production capacity.  SABIC has the key structural advantage of  very low-cost feedstock for its  petrochemical complexes in Saudi Arabia that helps the company maintain a healthy EBITDA margin of  approximately 32%.  The company increased its revenues by 25% and net income by 36% YoY. SABIC  represents approximately 11% of the market cap  of the Tadawul index, and while the stock has  underperformed the general market, we believe it will be a key beneficiary of foreign flows once the Saudi  market opens up to foreign investors."


Don't miss our other post from the hedge fund's Q1 letter on why Passport is net short.

Why John Burbank's Passport Capital Is Net Short: Q1 Letter

John Burbank's hedge fund firm Passport Capital is "net short both in dollar and beta terms" according to their first quarter letter to investors.  But even with this positioning, they obviously still have some sizable longs so we've also posted up Passport's top 10 holdings. 

Their Passport Global Fund started the quarter with net exposure of -3% and ended the quarter net short -12%.  On the subject of taking on more risk, Burbank writes (emphasis ours):

"For several years now, we have said that we would raise our risk budget when we felt it was prudent.  In  large part this would generally require three things to occur:  1) a lower correlation regime that could  benefit idiosyncratic stock selection; 2) the potential for a less-skewed distribution between stock winners 5  and losers; and 3) conviction in our macro and bottom-up view.  Since the March 2009 equity low, the  S&P has rallied 122%.  The Russell 2000 has rallied  over 152% in that time.  Given our forwardlooking economic assessment, this is the first time in a long while where we believe the best opportunity  to derive idiosyncratic alpha is in security selection on the short side."

This stance largely comes from their belief that central bank liquidity has fueled upside and that the easy money has been made.  We highlighted Passport's short positioning in Burbank's last letter.


He goes on to reiterate his conviction:

"To be clear, we think this is one of the most attractive environments for stock selection we've witnessed in at least five years and that now is a prudent time to run at a higher level of predicted active risk.  We aggressively increased our risk budget in mid-February ... If correlations stay persistently low, managers with stock selection skill should benefit."

We've also previously posted Lee Ainslie and Maverick Capital's letter with insightful commentary on the market's extreme correlation in recent years.  Now that dispersion has increased, numerous long/short managers are undoubtedly rejoicing.


Burbank concludes that central banks and 'performance anxiety' are the two main culprits for the hot start in equities this year:

"Through the first quarter, central bank liquidity provisioning has, we think, largely served to fix prices higher and has driven investors to become fully net long invested in order to avoid missing out.  Looking ahead, we believe we're going to see a great separation of winners and losers, of solvency and insolvency, of liquidity and illiquidity around the world."

However, it does appear as though Passport's conviction has spooked some investors as their main fund saw outflows of $509 million in the first quarter (it now manages $1.3 billion).  The firm in general now manages $3.2 billion.

Be sure to also check out more from the hedge fund's Q1 letter: Passport's top 10 holdings & Saudi equity theses.

Passport Capital Sees "Major Retrenchment in Risk Assets": Latest Portfolio Changes

Passport Capital founder John Burbank recently sent out a letter to investors updating their macro views.

Despite being net short, their Passport Global fund is up 4.1% for the year. Their neutrally-exposed Long/Short fund has returned 7.5% and their net long Special Opportunities fund is up 12.9% for the year.

Burbank writes, "I have strong conviction about our current positioning - perhaps as strong as I have ever felt in the 11+ years that I have been running Passport Capital. Simply put, I believe that the current market environment is setting up for a major retrenchment in risk assets and we are well positioned to benefit from this."

Just a month ago, Burbank made an appearance and said that 2012 is a stockpicker's market.


Passport Capital's Main Views

They feel that Central Bank liquidity has merely boosted prices but has done nothing else constructive. Burbank believes that deflation is the real risk (see the best investments during deflation). The hedge fund also takes the stance that equity markets are misconstruing economic growth in the developed world.

Passport feels a recession is coming in 2012 or early 2013 in the US. They note that average equity declines during recessions is 40%, though even a 20% decline would take the market back to the October 2011 lows.


Burbank's Portfolio Changes

In late 2011, they reduced portfolio illiquidity and have been selling into strength in the equity markets as of late. They've also boosted hedges and shorts "less to reduce net exposure and more to add idiosyncratic risk aligned with our negative economic view."

Burbank's firm also bought more physical gold and also started a position in Brent Crude Oil. These are both plays on increasing Central Bank liquidity. You'll recall that John Paulson originally started his gold fund as a bet against the US dollar as well.

Passport has also started a position in mortgage backed securities which they believe to "have the potential to deliver high risk-adjusted yield irrespective of equity market valuations." Additionally, they initiated a positive-carry position in deflationary rates trade (3yr1yr) which they feel will benefit from either the Fed holding short-term rates low or a risk-off period.


Saudi Equities Most Compelling

Passport has their single largest equity allocation to Saudi equities. Even though that market is up 23% year-to-date, they feel that "Saudi equities constitute the best single asymmetric equity market we can find."

For more coverage on this hedge fund, we've highlighted why Passport likes Marathon Petroleum as well as their rational for owning Liberty Interactive.