Thursday, November 1, 2012

Passport Capital Q3 Letter to Investors

Despite the bearish outview, Burbank is finding value in US dividend yielding large cap equities. Burbank discusses some of his top holdings, and why he likes the companies.
Cytec Industries Inc (NYSE:CYT) (7% of Global Fund NAV): Cytec has been a consistent top 10 investment throughout 2012. Burbank see  potential gains in both legacy aircraft builds, which are approximately 5%–20% carbon fiber by weight, as well as in new designs, such as the Boeing 787 Dreamliner and Airbus A350, which are approximately 50% carbon fiber. With about an 8-year backlog for planes and the constant concern over fuel prices, we believe Cytec’s commercial aerospace composites business will continue its rapid growth trajectory.  Based on comparables such as Hexcel Corporation (NYSE:HXL) (HXL US) and SGL Carbon SE (ETR:SGL) (SGL GR), he believes that Cytec Industries Inc (NYSE:CYT) should trade at a 9x EV/EBITDA from the 7-8x it traded at as of mid-October.

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