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John Burbank, the founder of Passport Capital, did not expect to work in the finance industry. “I went to business school at Stanford, but it wasn’t until I was about 30 years old when I decided on my own that I was going to”, said Burbank during an interview with Benzinga Podcast in August last year. Despite the late decision, Burbank is doing quite well in the industry. He was well known for predicting the collapse of the U.S. housing market starting in 2005 and returning a stunning 219% in 2007. His Passport Capital currently has approximately $4.2 billion assets under management and a team of 40 investment professionals focusing on various sectors.

We like Burbank and we urge investors to focus on the best stock picks of his Passport Capital. Passport Capital’s Global fund returned 18.5% annually over the last five years after fees and Burbank’s cut. Below is a list of top 20 positions in the latest 13F portfolio of the fund.

Company Name

Ticker

Value

Activity

WALTER ENERGY INC

WLT

168001

New

CYTEC INDUSTRIES INC

CYT

105139

50%

THORATEC CORP

THOR

83826

-7%

BARRICK GOLD Put

ABX

58312

New

LIBERTY MEDIA CORP

LINTA

49357

49%

MOSAIC CO.

MOS

45787

New

U.S. STEEL Call

X

43941

New

VIVUS INC

VVUS

34897

0%

WEBMD HEALTH CORP

WBMD

29146

New

APPLE INC

AAPL

28828

78%

NEVSUN RESOURCES

NSU

28429

-9%

SOUTHERN COPPER

SCCO

27482

180%

PRAXAIR INC

PX

24548

0%

MERCADOLIBRE INC

MELI

23897

-11%

HCA HOLDINGS INC

HCA

23843

New

ALKERMES INC

ALKS

23743

0%

GOOGLE INC

GOOG

23486

109%

AMAZON COM INC

AMZN

22510

226%

ACORDA THERAPEUTICS

ACOR

22200

0%

ACCURAY INC DE

ARAY

20050

330%

The value of Passport’s 13F portfolio was reduced from the $2.7 billion at the end of June to $1.4 billion at the end of September. The number of positions in the portfolio was also reduced from 130 to 117 different positions. Passport Capital sold out a few positions. For example, the fund used to have $67 million invested in Cree Research Inc Call (NASDAQ:CREE) at the end of the second quarter. According to the latest 13F report of Passport Capital, it did not own any CREE call options at the end of September. CREE was down 5.35% so far since the end of September, during which SPY returned 10.35%. Jim Simons also sold out his stakes in CREE over the third quarter. Passport Capital also sold out its stakes in CF Industries Holdings Inc (NYSE:CF), Juniper Networks Inc (NYSE:JNPR), Bucyrus International Inc (NASDAQ:BUCY), Intrepid Potash Inc (NYSE:IPI), and Lubrizol Corp (LZ).

On the other hand, Passport Capital also opened a few new positions in the third quarter. The largest new position it opened was Walter Energy Inc (NYSE:WLT). The fund reported to own $168 million worth of WLT at the end of September. WLT was also the largest position in Passport’s 13F portfolio at the end of the third quarter. The stock returned 19.65% so far since the end of the third quarter, beating the market by over 9 percentage points. John Paulson’s Paulson & Co also had over $60 million invested in WLT. Passport Capital also bought new stakes in the put options of Barrick Gold Corp (NYSE:ABX), Mosaic Co (NYSE:MOS), and the call options of United States Steel Corp (NYSE:X). “Walter is the largest pure play metallurgical coal producer in the world” Burbank said in his third quarter investor letter. Met coal prices were around $300 during Q2 and Q3. Burbank thinks met coal prices will average around $250 in 2012 and considering that Walter is able to produce met coal for about $120 per ton, Burbank is extremely bullish about WLT. He estimates that WLT is trading at 4.3 times 2012 EV/EBITDA. Recently Peabody and ArcelorMittal valued Macarthur coal at 10.5 times 2012 EV/EBITDA.

Passport Capital was also bullish about Cytec Industries Inc (NYSE:CYT). The fund reported to own $105 million worth of the stock at the end of September, up 50% from the end of June. CYT returned 32.56% since the end of the third quarter, heavily beating the market by more than 22%.

Other stocks Passport Capital was bullish about include Thoratec Corp (NASDAQ:THOR), Liberty Media Corp (NASDAQ:LINTA), Vivus Inc (NASDAQ:VVUS), Webmd Health Corp (NASDAQ:WBMD), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG) and Apple Inc (NASDAQ:AAPL). We also think that technology stocks such as Apple and Google are undervalued but we are most intrigued by Burbank’s big bet on Walter Energy.

Source: Passport Capital's Top Stock Picks