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Summary

  • Loeb's 13F portfolio increased 19% this quarter from $6.8B to $8.1B. The number of positions decreased from 47 to 41.
  • Third Point established a huge new 13.39% of the US long portfolio position in Ally Financial as a result of their IPO in April.
  • The top-three positions are Dow Chemical (13.92%), Ally Financial (13.39%), and Actavis plc (6.86%) which together are at just over one-third of the portfolio.

This article is the first in a series that provides an ongoing analysis of the changes made to Dan Loeb's US stock portfolio on a quarterly basis. It is based on Third Point's regulatory 13F Form filed on 08/14/2014. Dan Loeb founded Third Point in June 1995 with $3.3M raised mainly from friends and family. His management style is a combination of traditional value investing, long/short event-driven (bankruptcy or spin-off), and an activist philosophy that buys into troubled businesses with inefficient management. The idea in the latter case is to attempt to replace management through activism thereby helping increase shareholder value over time.

Dan Loeb has an enviable long-term performance track-record. From inception in December 1996 through Q2 2014, Third Point's flagship offshore fund returned 17.8% annualized return compared to 7.5% for the S&P 500 index. 2008 was the worst-performing year when it lost close to one third of its assets. The firm has over $14B in Assets Under Management (AUM). The worldwide fund currently has just below 60% invested in US long equities and they use very little leverage. On the average, around half of the fund's assets are shorted although the figure fluctuates considerably quarter-to-quarter.

The 13F portfolio is very concentrated with the top-three holdings accounting for over one-third of the entire portfolio. Recent 13F reports show around 50 long positions. This quarter, Loeb's US long portfolio increased 19% from $6.8B to $8.1B. The number of holdings decreased from 47 to 41. Largest five individual stock positions are Dow Chemical, Ally Financial, Actavis plc, American International Group, and Sotheby's.

New Stakes:

Ally Financial (NYSE:ALLY): ALLY is a huge 13.39% of the US long portfolio position established this quarter as a result of its IPO in April. Loeb started investing in ALLY in 2011 through unsecured debt and preferred securities. He currently holds around 9.5% of the shares outstanding. The stock started trading at around $24 and currently trades at $24.83.

Rackspace Hosting Inc. (NYSE:RAX): RAX is a fairly large 3% of the US long portfolio position established this quarter at prices between $26.28 and $38.28. The stock currently trades near the middle of that range at $33.38. The activity indicates a bullish bias.

FMC Corporation (NYSE:FMC): FMC is a 1.36% of the US long portfolio position established this quarter at prices between $70.62 and $78.45 and the stock currently trades below that range at $65.94. For investors attempting to follow Loeb, FMC is a good option to consider for further research.

IAC/InterActive (NASDAQ:IACI): IACI is a 1.70% of the US long portfolio position established at prices between $62 and $70 and the stock currently trades at $68.38.

Amgen Inc. (NASDAQ:AMGN), AstraZeneca plc (NYSE:AZN) Calls, Finisar Corporation (NASDAQ:FNSR), & Walgreen Company (NYSE:WAG): These were very small (less than ~1% of the US long portfolio each) positions established this quarter. The stake establishments represent a mild bullish bias toward these businesses.

Stake Disposals:

Cabot Oil & Gas (NYSE:COG): COG stake was first established in Q1 2013 when 1.25M shares were purchased at prices between $24 and $34. The original stake was increased by around 140% in Q4 2013 at prices between $32.63 and $38.93 and a further 50% last quarter at prices between $32.24 and $41.61. This quarter, the entire 2.24% position was eliminated at prices between $32.41 and $39.40. The stock currently trades at $33.50. The about-turn indicates a clear bearish bias.

Crown Holdings (NYSE:CCK): CCK is a 1.97% of the US long portfolio position eliminated this quarter at prices between $44.19 and $50.68. The position was established in Q4 2013 at prices between $40 and $45 and since then had been kept steady. The stock currently trades at $47.09.

Google Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL): GOOG was a fairly large 3.44% of the US long portfolio as of last quarter. It was disposed of this quarter at prices between $510 and $579. The stock currently trades at $583. The original position was purchased in Q3 2013 at prices between $423 and $435 and was almost doubled over the next two quarters. Loeb realized short-term gains from this position.

International Paper (NYSE:IP) & Calls: IP was first purchased in Q1 2013 when around 6.6M shares were purchased at prices between $40 and $47. The position size peaked in Q3 2013 at 8.75M shares. The investment thesis boiled down to anticipating near-term sector and secular tailwinds along with the chance for increased buybacks and dividends. The position was sold down to 6M shares by last quarter. This quarter, the entire position was eliminated at prices between $45 and $51. The stock currently trades at $47.62.

Citigroup Inc. (NYSE:C), Select Sector SPDR Industrials (NYSEARCA:XLI), & Verizon Communications (NYSE:VZ): These are significantly large positions established last quarter but eliminated this quarter. Third Point's most recent investor letter mentions that they sold down several positions and believed having dry powder would be very beneficial towards year end. These stake eliminations are consistent with that sentiment.

Baidu Inc. (NASDAQ:BIDU), Mondelez International (NASDAQ:MDLZ), NCR Corporation (NYSE:NCR), Nokia Corporation (NYSE:NOK), Ocwen Financial (NYSE:OCN), Signet Jewelers (NYSE:SIG), Tim Participacoes (NYSE:TSU), & Time Warner Cable (NYSE:TWC): These are very small (less than ~1% of the US long portfolio each) positions that were eliminated this quarter. As the position sizes were very small, the activity does not represent any clear bias.

Stake Increases:

Dow Chemical (NYSE:DOW): DOW is currently Third Point's largest individual stock position at 13.92% of the US long portfolio. The original stake was established in Q4 2013 at prices between $38.30 and $45. This quarter, the position was increased by just over 180% at prices between $46.95 and $53.15. The stock currently trades at $53.07. It is an activist stake and Loeb has said that a "combination of closures, modifications brownfield investments, and divestitures" will be required in Dow's petrochemical assets to harness the full potential. Over the last one-year, the stock has returned around 44% but the ten-year return is a depressing ~30%.

Anheuser-Busch (NYSE:BUD): BUD is a 2.47% of the US long portfolio position established last quarter at prices between $94 and $107. The stake was increased by ~30% this quarter at prices between $105 and $116. The stock currently trades at $111. The activity indicates a bullish bias.

Dollar General (NYSE:DG) & Ashland Inc. (NYSE:ASH): These two positions were increased by one-third each this quarter. ASH is a 1.34% of the US long portfolio position. It was increased this quarter at prices between $94 and $109. The original position was established last quarter at prices between $89 and $100. The stock currently trades at $107. DG is a 2.82% of the US long portfolio position that was increased this quarter at prices between $53.50 and $62.82 and the stock currently trades just outside that range at $63.61. DG was first purchased in 2012 and the position has wavered since.

H&R Block (NYSE:HRB): HRB is a 1.77% of the US long portfolio position established last quarter at prices between $28 and $32. It was increased by ~23% this quarter at prices between $27.40 and $33.52. The stock currently trades at $33.83.

Masco Corporation (NYSE:MAS): MAS is a 2.32% of the US long portfolio position established last quarter at prices between $20.74 and $23.63. It was increased by ~80% this quarter at prices between $19.54 and $22.89. The stock currently trades at $23.51. The activity indicates a bullish bias.

Sensata Technologies (NYSE:ST): ST is a 1.73% of the US long portfolio position established last quarter at prices between $36.78 and $42.90. The stake was increased by ~62% this quarter at prices between $41.59 and $46.78. The stock currently trades outside those ranges at $49.76.

YPF S A (NYSE:YPF): YPF is a 2.51% of the US long portfolio position established last quarter at prices between $21.05 and $33.08. It was increased by over 135% this quarter at prices between $27.90 and $35.95. The stock currently trades at $32. Third Point anticipates a change in the political leadership of Argentina at the end of 2015 and are posturing to benefit from an increase in foreign direct investment from that point on.

Anadarko Petroleum (NYSE:APC) & Calls, Coca-Cola Enterprises (NYSE:CCE), Constellation Brands (NYSE:STZ) & Calls, & Roper Industries (NYSE:ROP): These are significant positions that saw small increases (less than ~10% increase) this quarter. The activity represents a mild bullish bias toward these businesses.

Stake Decreases:

American International Group (NYSE:AIG): At the end of 2012, AIG was a huge stake at 12% of the US long portfolio. 18.5M shares were purchased during that year at prices between $23 and $35. The original purchase thesis was focused on two short-term factors: 1) the "forced-selling" dynamic at play due to treasury exit, and 2) increased demand due to index weighting increase as a consequence of the government exit. By last quarter, the position was sold down to 7M shares. The bulk of that selling happened in Q1 & Q2 2013 at prices between $35 and $45. This quarter, the stake was reduced by another ~14% at prices between $49.40 and $55.70. The stock currently trades at $55.58. Loeb is harvesting large long-term gains from this position.

Avago Technologies (NASDAQ:AVGO): AVGO is a 1.77% of the US long portfolio position that was reduced by half this quarter at prices between $58.53 and $72.07. The position was established last quarter at prices between $52.49 and $65.31. The stock currently trades at $76.27. The quick turnaround indicates a bearish bias.

Cheniere Energy (NYSEMKT:LNG): LNG is a 1.98% of the US long portfolio position established in Q4 2013 at prices between $34 and $45. This quarter, the position was reduced by 25% at prices between $54 and $72. The stock currently trades at $75.23. Loeb is starting to realize short-term gains from this position.

Citrix Systems (NASDAQ:CTXS): CTXS is a 1.54% of the US long portfolio position established last quarter at prices between $52.72 and $63. This quarter, the stake was reduced by ~22% at prices between $54.50 and $65. The stock currently trades at $70.10.

FedEx Corporation (NYSE:FDX): FDX stake was first established in Q3 2013 when 2M shares were purchased at prices between $98 and $117. This quarter, the position was reduced by half at prices between $131 and $152. The stock currently trades at $150.55. Loeb is harvesting short-term gains from this position.

T-Mobile US (NYSE:TMUS): TMUS is a 3.31% of the US long portfolio position established in Q4 2013 at $25 per share as a result of the company's secondary offering. The buy-thesis was that despite regulatory issues, a combination of TMUS with either Sprint (NYSE:S) or Dish Networks (NASDAQ:DISH) was the only real alternative to the duopoly of AT&T (NYSE:T) and Verizon. The original position was increased by ~25% last quarter at prices between $29.50 and $33.64. This quarter, the stake was reduced by just over 15% at prices between $28.10 and $34.86. The stock currently trades at $29.16.

Williams Companies (NYSE:WMB): WMB is a 2.68% of the US long portfolio position first purchased in Q4 2013 at prices between $35 and $39. The stake was increased by ~18% last quarter at prices between $38 and $43. This quarter saw an about-turn as the position was reduced by 25% at prices between $40 and $59. The stock currently trades at $58.32.

Hertz Global (NYSE:HTZ), CF Industries (NYSE:CF) & Liberty Global (NASDAQ:LBTYA) (NASDAQ:LBTYK): These are significant positions (more than 0.5% of the US long portfolio) that saw small decreases (less than ~10% decrease) this quarter. As the activities were minor, they do not indicate a clear change in bias.

American Airlines Group, EQT Corporation (NYSE:EQT), & Intrexon Corporation (NYSE:XON): These are very small positions (less than ~1% of the US long portfolio each) that were further reduced this quarter.

Kept Steady:

Actavis plc (NYSE:ACT): ACT is a top-three position at 6.86% of the US long portfolio. It was established last quarter at prices between $168 and $227 and the stock currently trades near the top end of that range at $226. The large stake establishment indicates a clear bullish bias.

Sotheby's (NYSE:BID): BID is a 3.43% of the US long portfolio position first purchased in Q1 2013 at prices between $32 and $40. The bulk of the current position was purchased in Q3 2013 at prices between $39 and $51. It is an activist stake and on October 2nd, 2013 Dan Loeb wrote a letter to Sotheby's chairman asking him to step down. The main point of the letter was that the company's upper management and board interests are not aligned with shareholders. The stock currently trades at $41. For investors attempting to follow Third Point, BID is a very good option to consider for further research.

Enphase Energy (NASDAQ:ENPH): ENPH has been in the portfolio since its 2012 IPO - the position has remained untouched ever since. Third Point's investment in the company goes back to January 2007 when they sponsored the company's entire first round of Series B funding of $4.5M for a 42% stake. The current stake is at ~17% of the company. Loeb revealed that at the time of IPO, the investment already had a ~20% IRR. Since then, the stock has returned ~84%. It has been a volatile stock trading as low as $2 in November 2012. It currently trades at $13.50.

The 13F portfolio also shows the following minute (less than 0.5% of the portfolio each) stakes: BioFuel Energy (NASDAQ:BIOF), JDS Uniphase (NASDAQ:JDSU), Memorial Resource Development Corporation (NASDAQ:MRD), Moelis & Company (NYSE:MC), and Owens Corning (NYSE:OC).

The spreadsheet below highlights changes to Loeb's US stock holdings in Q2 2014:

(click to enlarge)

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Source: Tracking Dan Loeb's Third Point Portfolio - Q2 2014 Update