Harriet Lefton

About the Author Harriet Lefton

Harriet originates from the UK where she worked as a journalist specializing in the metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer.

Subprime Star John Burbank’s Q3 portfolio trades

Multi-billionaire John Burbank is the founder and Chief Investment Officer of global investment firm Passport Capital LLC. After borrowing the necessary funds from friends, he founded the firm in 2000 with only $800,000. The fund has since exploded and now has assets under management (AUM) of $4.3 billion – boosted by a 219% gain in 2007 following Burbank’s correct prediction that the subprime lending industry was about to implode.

Now following the latest release of 13F forms filed by funds with the SEC we can see how Burbank traded in the last quarter. The fund famously shut down its long-short equity fund, which managed about $833 million, in April this year. At the time people familiar with the matter told Business Insider that Passport was struggling due to under-performance and investor redemptions. Indeed in 2016 the Long-Short fund lost 11.8% reversing its 2015 gains, when Passport Long/Short gained 10.1%.

Let’s take a closer look at some of the fund’s most intriguing moves now:

New: Tahoe Resources (NYSE:TAHO)

Burbank initiated a new position in mining company Tahoe Resources. Interestingly, this is now Passport’s no 1 holding at 10.5% of the total portfolio. However, since the last filing date, the stock has already dropped by -11%. Tahoe, which calls itself ‘the leader in precious metals’ reported poor Q3 results earlier in November. On the flip side, one positive revealed by the results is that the company’s gold sales were up 10% from last year.

Boosted: Alibaba, Altaba, Amazon (NASDAQ:AMZN)

Burbank boosted Alibaba, Altaba and Amazon in the third quarter. These three stocks are now all part of the fund’s top six holdings. In particular, Burbank ramped up the fund’s Amazon holding by 104%. The Street would no doubt approve of such a move. Amazon has a very strong outlook according to analysts with 32 buy ratings and just 1 hold rating in the last three months. These analysts have a $1,253 price target on AMZN vs its current share price of just $1127. The highest price target on the stock of $1,430 comes from top Wells Fargo analyst Ken Senafollowing Q3 results that “clearly exceeded” expectations. Sena also cited the fact that Q4 guidance was better-than-expected on both the top and bottom lines as a reason for his super bullish target.

Slashed: Advanced Micro Devices (NASDAQ:AMD)

In the last quarter, Burbank slashed the fund’s holding in semiconductor stock AMD by 75%. This could well be a prudent move. The stock has a Hold analyst consensus rating on TipRanks, where analysts are divided on the stock’s outlook. Morgan Stanley’s Joseph Moore has a Sell rating on AMD and a price target of just $8 (-29% downside). He says that the stock exploded on the cryptocurrency boom, but that the cryptocurrency will soon be so evolved that AMD’s technology will no longer be necessary: “This could be more problematic for AMD, which has not been clear on the size of the exposure, than for NVIDIA, which has carefully outlined exposures and ensured that the Street models budget for significant declines.”

Exited: Facebook (NASDAQ:FB)

Burbank made the surprise decision to exit FB completely. The move is surprising given that the company has one of the strongest ratings on the Street. Indeed FB has received 29 buy ratings, 1 hold rating and just 1 sell rating in the last three months. These analysts have an average price target on the stock of $208 (16% upside from the current share price). Only recently on 2 November, top RBC Capital analyst Mark Mahaney ramped up the price target from $195 to $230 following very strong Q3 results.

FB is Mahaney’s no 1 large-cap stock. He says “18 straight quarters of 50%ish+ Y/Y Ad Revenue Growth and mid-to-high-teens MAU growth (off massive scale) speaks volumes about FB’s value proposition to both advertisers and consumers. And FB has several new revenue growth drivers (Instagram, Video, Messaging, etc).”

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