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Dan Loeb is one of the hottest hedge fund managers, returning more than 40% in 2010 after fees and expenses. His 2011 performance is also on track to deliver spectacular returns. Dan Loeb’s Third Point Partners L.P. returned 3.7% in February and 8.1% during the first two months of 2011. Dan Loeb’s top 5 positions at the end of February were Gold, Delphi, Chrysler, El Paso Corp (EP), and LyondellBasell. His top winners are Gold, NXP Semiconductor, El Paso, Technicolor, Williams Companies Inc (WMB). (You can see the details of Loeb’s latest investor letter here.)

In this article, we will focus on Dan Loeb’s largest stock picks in his 13F portfolio. The performance of these stocks is in line with his reported returns. We don’t know Loeb’s short positions but most individual investors who follow hedge funds imitate their long positions. Here are Dan Loeb’s top 13F holdings and their performance since the end of December.

Company

Ticker

Return

Value (x1000)

POTASH CORP

POT

8.4%

185796

LYONDELLBASELL

LYB

17.4%

153518

ALCON INC

ACL

1.7%

130720

MASSEY ENERGY CO

MEE

26.3%

107300

WILLIAMS COS

WMB

24.5%

98880

P H H CORP

PHH

-8.2%

81025

HEALTH NET INC

HNT

15.4%

76412

C I T GROUP INC NEW

CIT

-9.7%

73005

N X P SEMICONDUCTORS

NXPI

35.2%

65942

LIBERTY MEDIA CORP NEW

LINTA

-0.5%

63080

MEAD JOHNSON NUTRITION

MJN

-7.1%

62250

LENDER PROCESSING S.

LPS

9.8%

53136

APPLE INC

AAPL

6.9%

51610

ABITIBIBOWATER INC

ABH

13.9%

45610

ASPEN TECHNOLOGY INC

AZPN

17.3%

44450

SMURFIT STONE CONTAINER

SSCC

47.8%

38400

SUNOCO INC

SUN

11.8%

36279

DEPOMED INC

DEPO

44.5%

33708

CITIGROUP INC

C

-6.3%

33110

COMCAST CORP NEW

CMCSA

13.1%

25266

ORITANI FINANCIAL CORP

ORIT

3.5%

25008

AIRGAS INC

ARG

5.7%

24984

C V R ENERGY

CVI

39.5%

24288

SPDR GOLD TRUST

GLD

0.4%

23999

XERIUM TECHNOLOGIES INC

XRM

46.7%

22911

N A B I BIOPHARMACEUTICALS

NABI

-0.7%

22014

RIO TINTO PLC

RIO

-3.4%

21498

ABRAXAS PETROLEUM

AXAS

8.3%

21010

MADISON SQUARE GARDEN

MSG

5.4%

20624

VIEWPOINT FINANCIAL

VPFG

11.6%

18725

Potash is Dan Loeb’s largest position. The stock returned 8.4% this year, beating the SPY by 3.9 percentage points. David Einhorn’s Greenlight, Thomas Steyer’s Farallon Capital, Jim Simons’ Renaissance, Andreas Halvorsen’s Viking Global, Richard Perry’s Perry Capital, and Mohnish Pabrai have large Potash investments.

LyondellBasell is another brilliant stock pick, returning 17.4% since the end of December. David Einhorn, Tom Steyer, and Andreas Halvorsen are other hedge fund managers who have LYB investments.

Overall, Dan Loeb’s top stock picks returned 12% since the beginning of this year, beating the index funds by 7.5 percentage points in less than 3 months. The regression tests we conducted at the end of 2010 also showed that Dan Loeb generated a 7% annual alpha after fees and expenses. Legendary investor Warren Buffett’s alpha was nearly zero during the same time period.

We believe investors can outperform the market by imitating Dan Loeb's top 30 positions. This portfolio will also have enough diversification. If investors had bought these stocks on February 15th after Loeb disclosed his holdings, they would have returned 0.6%, vs. SPY's 0.9% loss. This is an outperformance of 1.5 percentage points in less than 1.5 months.



Disclosure: I am long C.

Additional disclosure: I am long physical gold.

Source: Dan Loeb's Brilliant Stock Picks