John Burbank, head of San Francisco-based global investment firm Passport Capital, sounded the alarm concerning a possible contraction of the U.S and Chinese economies in a May 5 investor letter. The fund manager believes that debt levels in both countries have risen to an unsustainable extent, and that in the case of the U.S, the central bank has limited power and tools to rectify the situation through prudent monetary policy. With this view of an imminent economic downturn, Mr. Burbank sold off some of Passport Capital’s salient holdings during the first quarter, according to the firm’s latest 13F filing. We’ll take a closer look at these moves in this article and what may have prompted Mr. Burbank to jump ship.
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Martin Marietta Materials, Inc. (NYSE:MLM)
Firstly, Passport Capital disposed of 300,000 shares of the $11.68 billion supplier of construction materials during the January-to-March period. Considering that Martin Marietta Materials, Inc. (NYSE:MLM)’s stock price has risen by nearly 37% so far this year, the move could be a mix of both profit taking and Mr. Burbank’s glum economic outlook, as discussed above. The company’s gross profit margin excluding freight and delivery revenue increased by about 70% to 19.7% in the first quarter. Tom Russo‘s Gardner Russo & Gardner is bullish on Martin Marietta Materials, Inc. (NYSE:MLM), with a holding to 2.10 million shares, having increased it by 1% during the March quarter.
Union Pacific Corporation (NYSE:UNP)
The Omaha-based railroad company that provides a vital link in the supply chain of about 20 western states has seen its stock price appreciate by 6.25% on a year-to-date basis, but that wasn’t enough to stop Passport Capital from liquidating its entire Union Pacific Corporation (NYSE:UNP) holding of 805,000 shares. Transportation stocks are extremely sensitive to growth, something which Mr. Burbank is clearly rather pessimistic about, and considering the trend in the carloads and intermodal units this year compared to 2015, it appears to be justified. In mid-May, that number was hovering around the 500,000 mark, while last year it stood at about 550,000. By delivering an EPS of $1.16 for the first quarter, Union Pacific Corporation (NYSE:UNP) managed to beat analysts’ consensus estimate by $0.06, though its revenue of $4.83 billion was $70 million short of expectations and marked a 13.9% fall on a year-over-year basis. D E Shaw, founded by veteran investor David E. Shaw, cut its stake in the company by 76% to just under 794,000 shares during the first three months of this year.
We’ll look into three more stocks sold off by John Burbank during the first quarter on the next page.