John Burbank and Passport Capital’s Amazingly Successful New Stock Picks

Passport Capital’s John Burbank is famous for having predicted the subprime crisis. Passport’s flagship fund returned 219% in 2007. Burbank bet against the US housing market at the end of 2005. He was very skeptical about US equities so he also invested in emerging markets and commodities. These bets backfired in 2008. In a matter of few months, his funds lost more than 50%. Passport I, L.P. gained 23% in 2005, 14% in 2006, 220% in 2007, and then lost 51% in 2008. Burbank trailed the S&P 500 index in 2009, returning only 19%. In 2010, Passport Capital returned 18.3%, beating the SPY.

John Burbank PASSPORT CAPITAL

Burbank maintains a long bias in his portfolios as one can guess from his returns. Instead of investing in highly liquid and well-researched developed markets, he prefers investing in under-researched companies in fast growing developing markets. This helped Burbank achieve 23% annual returns since 2000.  This is how Passport describes its investment focus:

“Passport Capital LLC is a San Francisco based, global investment firm founded by John H. Burbank III in 2000. The firm manages approximately $4.1 billion in assets.  Passport’s investment process uses a combination of macroeconomic analyses to develop major themes and rigorous fundamental research on individual companies to create global portfolios.  The firm’s investment team focuses on the following areas: Agriculture, Basic Materials, Consumer, Energy, Financial Services, Healthcare, India & Capital Markets, Internet / Technology, and Middle East & North Africa.”

During the fourth quarter Burbank started using put options on several SPDR sector ETFs, including Materials, Retail, and Industrials. He also shorted MSCI Emerging Market ETF (EEM), Powershares’ QQQQ, Russell 2000 ETF (IWM), and SPY using put options. It’s clear Burbank uses put options on the broad market indices and sector ETFs to hedge his positions.

Insider Monkey, your source for free insider trading data, will compare Burbank’s 13F portfolio returns to his actual returns.

Burbank’s biggest new stock purchase is a $81 Million Apple (AAPL) position initiated by using call options. With this purchase, he joins Lee Ainslie, David Einhorn, George Soros,  Jim Simons, Dan Loeb, Andreas Halvorsen, Joseph DiMenna, Chase Coleman, Stephen Mandel, Barry Rosenstein, and Craig Effron. John Burbank also initiated a $61 Million Cisco (CSCO) position using stocks and call options. David Tepper’s Appaloosa and Leon Cooperman’s Omega Advisors are other hedge funds with Cisco positions.

Here are Burbank’s other large new or significantly increased positions:

Company Ticker Return Value (Million)
UNITED STATES STEEL CORP X 8.5% 80
CYTEC INDUSTRIES INC CYT 8.2% 73
APPLE COMPUTER INC AAPL 12.6% 51
MONSANTO CO MON 5.2% 45
WENDY’S/ARBY’S GROUP INC-A WEN 8.2% 37
ATMEL CORP ATML 27.5% 34
BARCLAYS BK PLC BCS 29.2% 31
HANSEN NATURAL CORP HANS 9.5% 30
BLACKROCK INC BLK 7.7% 30
MASTERCARD INC-CLASS A MA 13.6% 29
TRANSOCEAN LTD. RIG 15.8% 28
ROCKWELL AUTOMATION INC ROK 27.4% 27
POTASH CORP POT 19.9% 25
ALCON INC ACL 0.9% 22
VIACOM INC-CLASS B VIA 13.1% 22
VULCAN MATERIALS CO VMC 2.4% 22
CHEMTURA CORP CHMT 9.6% 21
CISCO SYSTEMS INC CSCO -8.2% 21
VODAFONE GROUP PLC-SP ADR VOD 12.1% 20
SANDRIDGE ENERGY INC SD 22.5% 20
WATSON PHARMACEUTICALS INC WPI 9.3% 20
CLIFFS NATURAL RESOURCES INC C CLF 19.2% 19
SUNCOR ENERGY INC SU 15.1% 19
DENDREON CORP DNDN -2.5% 19
ANHEUSER-BUSCH INBEV SPN ADR BUD -3.7% 19
ALLERGAN INC AGN 9.0% 19
RESEARCH IN MOTION RIMM 17.6% 18

 

John Burbank’s new stock purchases performed spectacularly, returning 11.5% vs. SPY’s 6.4% since the end of December.

Thirteen of his top fourteen picks managed to beat the SPY, which is very impressive. He has a lot of underfollowed stocks in his portfolio. One popular stock in his portfolio is Potash. David Einhorn’s Greenlight, Thomas Steyer’s Farallon Capital, Jim Simons’ Renaissance, Dan Loeb’s Third Point, Andreas Halvorsen’s Viking Global, Richard Perry’s Perry Capital, and Mohnish Pabrai have large Potash investments.

We are also curious about the performance of John Burbank’s top 30 long positions. Here are his top stock holdings:

Company Ticker Return Value (Million)
UNITED STATES STEEL CORP X 8.5% 80
CYTEC INDUSTRIES INC CYT 8.2% 73
CISCO SYS INC CSCO -8.2% 61
APPLE COMPUTER INC AAPL 12.6% 51
SUNCOR ENERGY INC SU 15.1% 50
CLIFFS NATURAL RESOURCES INC CLF 19.2% 49
MONSANTO CO MON 5.2% 45
WENDY’S/ARBY’S GROUP INC-A WEN 8.2% 37
ATMEL CORP ATML 27.5% 34
WALTER INDUSTRIES INC WLT -0.8% 32
BARCLAYS BK PLC BCS 29.2% 31
HANSEN NATURAL CORP HANS 9.5% 30
BLACKROCK INC BLK 7.7% 30
MASTERCARD INC-CLASS A MA 13.6% 29
TRANSOCEAN LTD. RIG 15.8% 28
ROCKWELL AUTOMATION INC ROK 27.4% 27
CUMMINS INC         COM CMI 1.1% 25
POTASH CORP POT 19.9% 25
ALCON INC ACL 0.9% 22
VIACOM INC-CLASS B VIA 13.1% 22
VULCAN MATERIALS CO VMC 2.4% 22
AK STEEL HOLDING AKS 3.2% 21
CHEMTURA CORP CHMT 9.6% 21
VODAFONE GROUP PLC-SP ADR VOD 12.1% 20
SANDRIDGE ENERGY INC SD 22.5% 20
WATSON PHARMACEUTICALS INC WPI 9.3% 20
HSN INC HSNI -2.2% 19
DENDREON CORP DNDN -2.5% 19
ANHEUSER-BUSCH INBEV SPN ADR BUD -3.7% 19
ALLERGAN INC AGN 9.0% 19

 

Burbank’s top 30 stock holdings returned 9.8% so far in 2011, vs. SPY’s 6.4%. Fifteen of his top 20 holdings managed to beat the SPY. It seems Burbank’s focus on under-researched companies is paying off handsomely.

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