Google Inc (GOOG), eBay Among Passport Capital’s Latest Favorites

PASSPORT CAPITALJohn Burbank’s Passport Capital is the San Francisco based investment firm that Burbank founded in 2000. Passport uses a ‘major themes’ and macroeconomic analysis approach. Burbank’s flagship fund returned 219% in 2007 thanks to big bets against the housing market, and then in 2010 he outpaced the S&P 500 with a 18.3% return. Burbank is famed for having been one of the oracles of the subprime crisis, so let’s see what he is predicting now.

Passport recently released its 13F for 3Q, and from that we get the sense that the fund is seeing value in a variety of industries, including tech and gold. One of the overwhelming themes we also noticed was Passport’s relative bullishness on a global economic outlook, including industrials and manufacturing. Passport did quite the moving and shaking during 3Q, doubling at least thirteen of its positions and adding over forty new positions. Two of the notable moves that caught our eye were Passport’s big ramp up in tech companies Google Inc (NASDAQ:GOOG) and eBay Inc (NASDAQ:EBAY). During the third quarter, Passport increased its Google holdings by over 200%. Google is now Passport’s 13th largest holding in its 13F portfolio. While Passport was jumping head first into Google, one other big-name fund downsized their Google position in 3Q - RenTech.

Google posted disappointing 3Q results, which has driven the stock down over 10% in the past month. Besides the operating loss posted by its Motorola segment, Google’s results were not as dismal as the stock’s tumble would warrant. As always, the search giant has some key growth prospects as major advertising dollars continue to shift to the Internet and away from print. Google has a stronghold on the search industry, owning over 65% of the U.S. search market, and should be able to benefit the most from this fundamental transfer. The search giant is trading at 21x trailing earnings, but only 14x forward earnings, whereas its historical P/E is around 25x.

The size of Passport’s eBay stake jumped 70% in 3Q, and now makes up over 3% of the fund’s 13F. eBay has managed to beat earnings for the last four quarters and shows promising growth going forward. PayPal is expected to offer consumers the ability to pay with the platform in certain physical retail locations by next year. We see the main driving force for eBay and PayPal being the transition to mobile payments and mobile commerce. eBay trades at only 18x earnings, while its main competitor Amazon trades at over 100x earnings. See if eBay is a better buy than Amazon.

Passport appears to be overly bullish on the chemical product manufacturer Huntsman Corporation (NYSE:HUN). Passport increased its shares of Huntsman over 200%, making it the fund’s 2nd largest holding, worth 7.2% of their 3Q 13F portfolio. The boost in Huntsman shares is just one of the reasons we believe that Passport is optimistic about the global economy.

Passport made notable investments in many other key bellwether companies, including Domtar (paper and paper products, increased shares 175%), CONSOL Energy (industrial mining, a new position), and Nucor (iron and steel, a new position). Huntsman is a special situation turnaround, having began restructuring of its textile effects business in 2011. This includes the closure of various production facilities. The chemical company is now performing better than expected, posting 3Q operating EPS of $0.70 compared to $0.45 YOY and beating estimates of $0.51. Check out our detailed earnings analysis. Huntsman still appears to be trading cheaply when compared to other major chemical companies Dow, Eastman and DuPont. Huntsman trades at 8x trailing earnings, but the other three all trade at P/E ratios above 13x.

Kinross Gold Corporation (NYSE:KGC) is another company that Passport has found a reason to get excited about. We believe the Fed’s plans to keep rates near zero for the next few years, and the vast amount of global uncertainty is a near term positive for gold and should lead to an ascension in gold prices. Kinross is one of our top five stocks to buy as gold moves higher. Passport’s increase in Kinross shares was north of 450% during 3Q, and now makes up 4.3% of Passport’s 13F, good for their fourth largest holding.

Despite three quarters of negative earnings, Kinross broke this streak by posting 3Q results of $0.22 EPS and beating estimates by 15%. The gold producer expects to meet its 2012 gold production forecast, but still trades at less than 9x forward earnings. Comparing this to major competitors Eldorado Gold (33x trailing) and Randgold (22x trailing), Kinross appears to have more room to run.

The notable new addition to Passport’s 13F portfolio was Las Vegas Sands Corp. (NYSE:LVS). Passport bought over 1.1 million shares during 3Q, making this new position Passport’s tenth largest 13F holding, right behind Las Vegas Sands’ rival Wynn at ninth. While Passport was getting into Las Vegas Sands, it was reducing its 2Q Wynn position by over 25% during 3Q. Check out our other thoughts on casino stocks. When looking at Las Vegas Sands it appears they might trade on the high side on a valuation basis, trading at 24x, compared to Penn National Gaming (17x) and Wynn Resorts (20x), but then we look at the company’s industry-leading expected growth rate and the premium is justified. Las Vegas Sands is expected to grow earnings by 22% annually over the next five years. Growth will be drive by its Macau and Singapore locations, where Macau gaming revenues were up 42% in 2011.

Overall we see Passport as being bullish on a global economic rebound and a return to discretionary spending. The two tech companies that Passport took an interest in will be driven higher by fundamental shifts in consumer preference (shift to mobile) and technological innovation (Internet advertising and mobile payments). The story for Huntsman is driven by a return to global manufacturing, while Las Vegas Sands will benefit from consumers loosening their pocket books. Be sure to check out all of Passport’s holdings.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!