In his pre-hedge fund past, Burbank was a consultant to Roger Richter of JMG Triton Offshore Ltd. and director of research at ValueVest Management. His investing career began just before the late-‘90s Asian crisis, where he learned valuable lessons that helped him avoid the dot-com debacle several years later. He earned a B.A. from Duke University and an MBA from Stanford Graduate School of Business.
Currently Burbank has both an equity portfolio and some intriguing irons in the fire elsewhere, but his 12-year history with Passport has been eventful as well.
In Passport’s first year of operation, it shunned the tech craze and shorted high-flying technology stocks. For the three years the S&P 500 reeled from the backlash of the overvalued stocks with returns in the negative numbers, Burbank’s flagship Global Strategy fund returned 36% in 2000, 7% in 2001 and 22.1% in 2002.
A few years later, Burbank made a very prescient call on the collapse of the U.S. housing market. He began shorting the overheated market in 2004, buying subprime mortgage-backed credit default swaps, exemplifying one of his standout quotes, “The way to make high returns is to invest in things people don’t understand.”
By 2007, as systemic cracks were spreading in the U.S. housing market, the Global Strategy Fund posted a staggering 219.7% return compared to 5.5% for the S&P, marking its eighth straight year of positive returns.
In 2008, when most of the market was crashing, Passport’s returns when down with it, like most funds. They posted a 50.9 percent loss that year. Though 13Fs from the period are not available, a Forbes article from April 2008 says that a quarter of the fund was invested in basic materials such as iron ore and gold miners, with other large positions in Indian financial exchange firm Financial Technologies, Asian education company Raffles Education, Yamana Gold (NYSE:AUY) and Transocean (NYSE:RIG).
By the end of 2008, Yamana Gold fell almost 50 percent, and Transocean plunged about 63 percent.
Now, Burbank is bullish on emerging markets, and one of his favorite ideas is investing in Saudi Arabia, which he has been doing for about three years, as foreigners were not allowed to invest there until August 2008. In February 2012, he had 15 percent of his fund allocated there, according to Bloomberg. High prices of oil, he says, are helping Saudi Markets, only 1 percent of which is held by foreigners.
The Saudi market was at that point trading at 11 times earnings with a 5 percent dividend yield, on an unlevered basis, and Saudis have about $600 billion in reserves and little corporate debt, making it a less risky investment, he said in a Bloomberg interview.
Burbank in his first-quarter letter to investors was pessimistic about the economy and foresees a recession in the U.S. in 2012 or early 2013. In response, he reduced portfolio illiquidity, increased shots and hedges, initiated an investment in mortgage-backed securities, added to his physical gold holdings and established a long position in Brent Crude.
Regarding equities, Burbank said 2012 is a great year for long and short equities. “Our strategy is to be picking individual securities of companies that aren’t depending on economic growth, and obviously biotech and healthcare is one of those sectors,” he said on Bloomberg.
His largest new buys in the first quarter are: Penn Virginia Group Holdings LP (NYSE:PVG), Wynn Resorts Ltd. (NASDAQ:WYNN), Methanex Corp. (NASDAQ:MEOH), Solutia Inc. (SOA) and Georgia Gulf (GGC). Of his top eight stocks, five are from the chemicals industry.
His largest holdings are Cytec Industries Inc. (NYSE:CYT), Vivus Inc. (VVUS), Marathon Petrol (NYSE:MPC), Google Inc. Cl A (NASDAQ:GOOG) and Liberty Media A (LINTA).
See John Burbank’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of John Burbank.