Phil Falcone is the founder of Harbinger and LightSquared, the latter for which he has been in the news for lately after the company filed for bankruptcy. This quarter, his picks are heavy on the natural resources. Here are his portfolio moves during the first quarter:
SPECTRUM BRANDS HOLDINGS
HARBINGER GROUP INC
CROSSTEX ENERGY INC
NORTH AMERICAN ENERGY PTNRS
CLIFFS NATURAL RESOURCES INC
E X C O RESOURCES INC
PRESIDENTIAL LIFE CORP
GENERAL MOLY INC
ALPHA NATURAL RESOURCES
GENON ENERGY INC
OWENS CORNING NEW
MEDIA GENERAL INC
Spectrum Brands (SPB) is getting a head start to the year to its Home & Garden business line with earlier than expected warm weather. Retail inventories for lawn and garden supplies have already been increasing demand for re-orders in March. And with the Black Flag/TAT deal, Home & Garden should lead the way for a very strong year. However, management has reported that the small appliance business will face headwinds into 2013 as inflation in Asia compresses margins. The plan is to seek new suppliers in other markets while making changes to its typical promotional offerings. We think margin pressure here could potentially be offset by Global Batteries & Appliances segment performance, which has seen some decent traction. Moreover, Global Pet Supplies appearing to have bounced off of lows with the FURminator acquisition, we think this segment can start contributing to growth numbers. SPB will continue to be driven by product launches and tuck-in acquisitions, but we simply don't see any meaningful catalysts ahead and prefer other companies in the consumer space.
Crosstex (XTXI) midstream master limited partnership, which operates approximately 3,300 miles of pipeline, 10 processing plants, and 4 fractionators while also providing services for natural gas production. The company has finally renewed its focus on growth, having identified a number of projects at attractive valuations (EBITDA multiples of 5.0x and lower). If undertaken, we think the projects would help increase fee-based margins by expanding the natural gas liquid/crude transportation. The company's main project is Cajun Sibon NGL pipeline, which is 60% committed; we view securing the remaining 40% of volume commitment as a notable catalyst. Additionally, the $210 million Utica Shale acquisition seems like an interesting opportunity for crude handling. XTEX trades at an 8.5% yield versus median yield of 7.1% for MLP comps; we think that difference will persist until Cajun Sibon gets the other 40% committed.
North American Energy Partners (NOA) has gotten itself a new CEO and more liquidity as of late. Martin Ferron will replace Rod Ruston as CEO. Ferron is coming over from a stint as CEO for Helix Energy Solutions (NYSE:HLX). Note that in April, Carl F. Giesler, a Managing Director at Harbinger Group (HRG) replaced Peter Dodd. Regarding the liquidity situation, in March, the company amended to extend its revolving credit facility, received a C$34 million cash settlement from Canadian Natural, and announced a C$40 million asset sale. With these actions, NOA should be well-funded to cover working capital needs. Given these major moves by the company, we are supporters of the stock. Hedge fund manager Richard Perry is among NOA shareholders.
Cliffs Natural Resources (CLF) is an iron-ore North American miner that has made efforts to diversify into Brazil and Asia and into metallurgical coal and chromite. With RG steel, a privately held US steel producer, filing for Chapter 11 bankruptcy protection on Thursday, we cannot get behind CLF as RG was a big CLF customer, buying ~ 4mtpa iron ore though not all from CLF. We are not confidant that sales volumes can be maintained in light of the bankruptcy, which will likely result in a 2012 volume disappointment; guidance is currently at 23mtpa. Broadly speaking, we are very tenuous on the outlook for iron ore. There is excess supply and weak demand, making it hard for us to identify much of an opportunity for upside. Billionaire Ken Fisher has the largest stake in CLF among the nearly 400 fund managers we are tracking (see Ken Fisher's stock picks).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.