Hedge Fund Tracking: Harbinger Capital Partners (Philip Falcone), Q3 2008

by: Market Folly

This is the Third Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F filings here.

The other funds we've already covered include:

Next, we have Harbinger Capital, a $13 Billion firm ran by Philip Falcone. Taken from StreetInsider:

Harbinger is a disciplined value investor with an emphasis on intensive credit research. Its focus is on middle market companies that tend to be misunderstood or under-researched by the market. Investment approaches include: Restructuring/Bankruptcy, Turnaround, Liquidation, Event Driven, Capital Structure Arbitrage, Short Sale and Special Situations.

At one point during this year, it was up as much as 42%, but its fortunes turned as it found itself -13% for the year as of October, as we noted in our hedge fund performance numbers post. One position that treated them nicely was their short of Wachovia (NASDAQ:WB), which we detailed here. Back in September, in a letter to investors, Falcone had assured investors that Harbinger was adequately positioned to stave off any further volatility the markets may bring its way, noting that the firm had reduced exposure to some of i higher volatility holdings (both on the long and short side). They have been very proactive in managing their portfolio this year, as evidenced by its Q2 portfolio. To learn more about Harbinger's manager, you can read our post about Philip Falcone.

The following were its long equity, note, and options holdings as of September 30, 2008 as filed with the SEC. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that it initiated in the last quarter):

  • Navistar (NYSE:NAV)
  • United States Oil Fund (NYSEARCA:USO) Puts
  • Constellation Energy (NYSE:CEG)
  • Alpha Natural Resources (ANR)
  • Seracare Life Sciences (NASDAQ:SRLS)
  • Bank of Montreal (NYSE:BMO)
  • Owens Corning (OC-WS-B) Warrants B
  • Green Builders (GBH)

Some Increased Positions (A few positions they already owned but added shares to):

  • Ultrashort S&P 500 ETF (NYSEARCA:SDS): Increased position by 150%
  • Ultrashort Dow30 ETF (NYSE:DXD): Increased position by 150%
  • Cablevision (NYSE:CVC): Increased position by 111%
  • Solutia (NYSE:SOA): Increased position by 69%
  • Nicor (NYSE:GAS): Increased position by 31%
  • Medivation (NASDAQ:MDVN): Increased position by 12%
  • Calpine (NYSE:CPN): Increased position by 5%

Some Reduced Positions (Some positions it sold some shares of - note not all sales listed):

  • Northwest Airlines (NWA): Reduced position by 99%
  • Ashland (NYSE:ASH): Reduced position by 94%
  • Cablevision (CVC) Calls: Reduced position by 60%
  • Ultrashort Financials ETF (NYSEARCA:SKF): Reduced position by 50%
  • Southern Union (NYSE:SUG): Reduced position by 37%
  • Hughes Communications (NASDAQ:HUGH): Reduced position by 20%
  • Mirant (MIR): Reduced position by 8%

Removed Positions (Positions it sold out of completely):

  • Georgia Gulf (GGC)
  • Horsehead Holding (ZINC)
  • Wachovia (WB) Puts
  • Nisource (NYSE:NI)
  • Spdr S&P Retail ETF (NYSEARCA:XRT) Puts
  • Peabody Energy (NYSE:BTU)
  • Yahoo (YHOO)
  • Wiliams Sonoma (NYSE:WSM)
  • Corn Products (CPO)
  • Sprint Nextel (NYSE:S)
  • AK Steel (NYSE:AKS)
  • Freeport McMoran (NYSE:FCX)

Top 20 Holdings (by % of portfolio):

  1. Calpine (CPN): 19.2% of portfolio
  2. Cliffs Natural Resources (NYSE:CLF): 9.7% of portfolio
  3. Cablevision (CVC): 8% of portfolio
  4. Navistar (NAV): 7.9% of portfolio
  5. Solutia (SOA): 6.2% of portfolio
  6. Atlas Air (NASDAQ:AAWW): 6.1% of portfolio
  7. Mirant (MIR): 5.8% of portfolio
  8. Leap Wireless (LEAP): 5.4% of portfolio
  9. New York Times (NYSE:NYT): 5% of portfolio
  10. United States Oil Fund (USO) Puts: 4.8% of portfolio
  11. Owens Corning (NYSE:OC): 4.5% of portfolio
  12. Ultrashort Financials ETF (SKF): 3.4% of portfolio
  13. Ultrashort S&P500 ETF (SDS): 1.8% of portfolio
  14. Nicor (GAS): 1.6% of portfolio
  15. Ultrashort Dow 30 ETF (DXD): 1.6% of portfolio
  16. Constellation Energy (CEG): 1.6% of portfolio
  17. Medivation (MDVN): 1.2% of portfolio
  18. Hughes Communications (HUGH): 0.9% of portfolio
  19. RTI International (NYSE:RTI): 0.88% of portfolio
  20. Augusta Resource (NYSEMKT:AZC): 0.87% of portfolio

Assets from the collective long U.S. equity, options, and note holdings were $9.3 billion last quarter and were $4.8 billion this quarter. As you can see, Harbinger decreased long equity and options exposure pretty significantly. It completely sold out of numerous previous top holdings of its firm, when it sold completely out of Freeport McMoran (previously 11% of the firm's holdings), AK Steel (previously 8% of the firm's holdings), and Sprint Nextel (previously over 6% of the firm's holdings). The firm was unloading some very large positions.

It is also worth mentioning that ever since the 13F filing has come out, Harbinger has been active in filing various 13D and 13G forms, which detail changes in its ownership of various companies listed above. We will also be covering these new position details over the next few days so everything ties into a cohesive whole. After all, Harbinger has changed up its portfolio quite a bit over the course of the year.

Please note that we have not detailed changes to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings. They do not reflect its cash, short portions, or holdings in other markets (currency, commodities, debt, foreign markets, private equity, etc.).

Overall, it's been one of the worst years ever for hedge funds, as we noted in our new November hedge fund performance number update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.