Dan Loeb is one of the hottest hedge fund managers, returning more than 40% in 2010 after fees and expenses. His 2011 performance is better than most hedge funds. Dan Loeb’s Third Point Partners L.P. lost 2.9% in June and gained 6.3% during the first half of 2011 (See article on hedge fund returns).
Dan Loeb sold 20 stocks during the first quarter and initiated 16 new positions. The stocks that he sold lost an average of 9% during the second quarter. He sold his entire stake in Citigroup (C), Bank of America (BAC), AIG (AIG), and Yahoo (YHOO). Financials were among the worst performing sectors in the second quarter. The stocks he bought gained 0.9% during the same time period, beating the S&P 500’s 0.1% return.
In this article, we will focus on Dan Loeb’s largest stock picks in his 13F portfolio. The performance of these stocks is actually better than 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 March.
CompanyName | Ticker | value | Activity | Return |
EL PASO CORP | EP | 198000 | New | 12% |
C V R ENERGY | 169068 | 356% | 6% | |
LYONDELLBASELL | 146335 | -17% | -2% | |
WILLIAMS COS | 143428 | 15% | -2% | |
SUNOCO INC | 98018 | 139% | -8% | |
N X P SEMICONDUCTORS | 97352 | 51% | -11% | |
HEALTH NET INC | 91560 | 0% | -2% | |
SMURFIT STONE CONTAINER | 86962 | 50% | 7% | |
APPLE INC | 69702 | 25% | -4% | |
PALL CORP | 69132 | 243% | -2% | |
TESORO CORP | 67075 | New | -15% | |
C I T GROUP INC NEW | 65952 | 0% | 4% | |
P H H CORP | 65310 | -14% | -6% | |
LIBERTY MEDIA CORP NEW | 64160 | 0% | 5% | |
MARATHON OIL CORP | 53310 | 900% | -1% | |
MEAD JOHNSON NUTRITION | 52137 | -10% | 17% | |
ASPEN TECHNOLOGY INC | 50966 | -3% | 15% | |
WHIRLPOOL CORP | 48655 | New | -4% | |
EBAY INC | 46560 | New | 4% | |
SAFEWAY INC | 44726 | New | 0% |
Loeb’s largest position is also a new position, El Paso (EP). This stock gained 12% despite the losses in energy stocks. This is one of the three stock picks Loeb discussed in his investor letter, which explained his rationale for this purchase. Barry Rosenstein also had nearly $550 Million in EP at the end of March. D.E. Shaw, Ken Griffin’s Citadel and Eric Mindich’s Eton Park Capital were also among EP investors.
Loeb’s second largest position also managed to beat the market by a large margin. This is also one of the three stocks Loeb discussed in his first quarter investor letter. Investors imitating Loeb’s top two positions would have returned 9% in 3 months. Eric Mindich and Ken Griffin did also invest in CVI. Ken Griffin’s Citadel was one of the top performing hedge funds so far in 2011, returning around 11%.
Dan Loeb’s best performing top stock was Mead Johnson Nutrition (MJN). This has been a long-term holding for Dan Loeb. There are also several other prominent hedge fund managers who are bullish about MJN. Stephen Mandel, James Dinan, and Jim Simons are among these investors. Jim Simons’ large cap stock picks managed to beat the S&P 500 index by 3 percentage points during the second quarter.
We like Dan Loeb and believe that investors can beat the index funds by imitating Dan Loeb’s favorite stock picks. 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.
Disclosure: I am long C.
