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!


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

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014


Enter your email:

Delivered by FeedBurner


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!