Investment Strategy

Passport Capital's investment philosophy is to invest in securities approaching an inflection point as informed by our macroeconomic analysis. Inflection points have been precipitated by bottlenecks of supply in the face of increasing demand in the materials and energy sectors; network effects and scale advantages inherent to internet business models; global growth driven by labor arbitrage in India and China; and the deterioration of credit quality in the subprime mortgage space as precipitated by loose global credit, among others. Investments primarily include public equity securities, equity derivatives, select direct investments in private companies, and credit default swaps.

Global Strategy

The global strategy seeks out inefficiencies in global equity markets, avoiding the highly liquid and well researched companies present in the US markets and preferring instead the under-followed, under-appreciated companies in specific targeted industries and geographies where valuations are more attractive and growth potential is much higher.  We attempt to identify short ideas through the same process, most recently targeting credit default swaps on sub-prime mortgages, but we maintain a net long bias due to our conviction in the intrinsic value proposition offered by our long positions.

Special Opportunities Strategy

The special opportunities strategy seeks to capitalize on our unique deal flow to generate significant returns through a concentrated portfolio of public and private investments that require substantial capital and/or value-added oversight.  Employing the full resources of our investment infrastructure, the strategy focuses on specific targeted industries and geographies where valuations are more attractive and growth potential is much higher.  The strategy is highly concentrated and has the ability to invest a substantial portion of its capital into private and illiquid investments.  For these reasons the strategy has a longer lockup and fewer redemption features than our other strategies.

India Strategy

Through its own FII, the India strategy invests in Indian companies with a focus on domestic economy sectors such as financial services, media, retail, consumer and special situations.  The strategy has a net long bias, targets long-term franchises, and can be concentrated in a few securities.

Materials Strategy

The materials strategy invests in public and private companies with a focus on the basic materials sector. The public equity investments typically comprises metals and mining companies with market capitalizations of less than $1 billion.  The private equity investments generally include companies that are expected to be public within 12 months.

Energy Strategy

The energy strategy is a long-biased strategy investing in targeted sectors within the global energy industry, including oil service, exploration and production and alternative energy.  In our opinion, valuations do not reflect the scarcity of both energy resources and services required to access them.  Certain sectors/stocks provide superior risk/return characteristics, based on contracts, sales growth, unrecognized potential reserves and information arbitrage.  

Renewable Energy Strategy

The renewable energy strategy is a long biased strategy investing in targeted sectors within the global renewable energy industry, including companies that develop, manufacture, own and promote renewable energy or energy efficiency technologies. In the manager’s opinion, renewable energy will increasingly be part of the solution to meet increased global energy demand driven by the increasing scarcity of traditional hydrocarbon sources, increasing cost competitiveness of renewable energy, and the rising public awareness of the environmental impacts from traditional energy sources.

Rig Strategy

The offshore rig strategy is an equity strategy aimed at achieving superior long-term capital appreciation by investing in a concentrated portfolio of offshore drilling rig contractors, the best risk/reward investment Passport Capital currently sees in the energy sector.  Intensive fundamental research is used to monitor the industry and to determine the investment merits of specific companies.