This article is part of 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 05/15/2015. Please visit our Tracking Dan Loeb's Third Point Portfolio series to get an idea of his investment philosophy and our last update for the fund's moves during Q4 2014.
The 13F portfolio is very concentrated with the top-three holdings accounting for 34.36% of the entire portfolio. Recent 13F reports show around 40+ long positions. This quarter, Loeb's US long portfolio decreased marginally from $11.09B to $10.82B. The number of holdings increased from 40 to 41. Largest five individual stock positions are Amgen Inc., Actavis plc, Dow Chemical, eBay Inc, and Ally Financial. As per their Q1 2015 investor letter, Third Point's 2015 YTD return was 3.3%. Annualized return since December 1996 (inception) is at 17.2%. The letter also discussed a new position in Devon Energy (DVN). It is not in the current 13F probably because the stake was established after the quarter ended.
New Stakes:
Yum! Brands (YUM) and Calls: YUM is a new 2.41% of the US long portfolio stake established this quarter at prices between $70 and $82. The stock currently trades at $91.54. Loeb's Q1 2015 letter discussed the position: the investment thesis boils down to its association with Chinese middle-class growth and the projected franchise-led cash-flow growth.
iShares Russell 2000 ETF (IWM) Puts: This is a fairly large (nominal value) 4.60% of the portfolio position. The large leveraged short position on the small-cap index is an indication that Loeb is bearish towards small-caps overall.
FedEx Corporation (FDX), Maxim Products (MXIM), McKesson Corporation (MCK), NXP Semiconductors (NXPI), Precision Castparts (PCP), and J.M. Smucker (SJM): These are very small ~1% positions established this quarter.
Note 1: In March, NXP agreed to acquire Freescale Semiconductor (FSL). NXP has returned just over 40% so far this year. Meanwhile FSL is up almost 70%.
Stake Disposals:
Alibaba Group Holdings (BABA): BABA was Loeb's second-largest position at 9.38% of the US long portfolio as of last quarter. It was established in Q3 2014 at prices between $87 and $94 and increased by ~39% last quarter at prices between $85 and $120. This quarter saw an about-turn as the entire stake was eliminated at prices between $81.58 and $105. The stock currently trades at $93.27. The quick elimination of a very large position indicates a clear bearish bias.
Allergan Inc. (AGN) and SPDR S&P 500 Index ETF (SPY): These are very small (less than 1% of the portfolio each) positions established last quarter and disposed of this quarter. AGN was a 0.77% of the US long portfolio position established at prices between $177 and $214. Actavis plc acquired Allergan in a $219 per share cash-and-stock deal that closed in March. The SPY stake was purchased at prices between $186 and $209 and disposed of at prices between $199 and $212. It currently trades at $213.
American Airlines Group (AAL): The 1.81% AAL stake was increased by ~36% last quarter at prices between $28.58 and $53.63. It was increased by 30% in Q3 2014 as well at prices between $35 and $43.70. This quarter saw the elimination at prices between $46.53 and $55.76. The stock currently trades at $42.61.
Anadarko Petroleum (APC) and Calls: The original APC stake established in early 2013 was more than doubled in Q3 and Q4 2013 at prices between $78 and $97. Last quarter saw a ~50% reduction at prices between $72 and $101 before the elimination this quarter at prices between $75.05 and $89.04. The stock currently trades at $86.17.
CF Industries (CF): The 1.60% CF position as of last quarter was purchased in Q1 2014 at prices between $225 and $265. Last three quarters saw selling as the original stake was reduced by around one-third at prices between $235 and $283. This quarter, the remaining position was sold at prices between $273 and $313. The stock currently trades at $321.
Citigroup Inc. (C): C was a medium-sized 2.44% of the US long portfolio position established last quarter at prices between $49.68 and $56.37. It was disposed of this quarter at prices between $46.95 and $54.26. The stock currently trades at $54.97.
EMC Corporation (EMC): The 1.88% EMC position was purchased last quarter at prices between $26.89 and $30.89 and eliminated this quarter at prices between $25.17 and $29.83. The stock currently trades at $26.84.
Hertz Global (HTZ): HTZ was a very small 0.93% of the US long portfolio stake established last quarter at prices between $19.38 and $25.47 and dropped this quarter at prices between $20.52 and $25.02. The stock currently trades at $21.05. 2014 also saw another roundtrip in HTZ.
Shire plc (SHPG): SHPG is a 0.96% of the US long portfolio position established in Q3 2014 at prices between $232 and $263. Last quarter saw a one-third reduction at prices between $170 and $263 and this quarter the remaining stake was sold at prices between $206 and $254. The stock currently trades at $260.
Note: In July 2014, AbbVie (ABBV) agreed to acquire SHPG in a $55B transaction but the deal was called off in October 2014. SHPG earned a breakup fee of $1.6B. Later, SHPG turned around and bought NPS Pharmaceuticals (NPSP) for $5.2B.
Williams Companies (WMB): WMB is a small 1.62% of the US long portfolio position first purchased in Q4 2013 at prices between $35 and $39. The stake was increased by ~18% in Q1 2014 at prices between $38 and $43. Q2 2014 saw an about-turn as the position was reduced by 25% at prices between $40 and $59 and last quarter saw a further ~60% reduction at prices between $54 and $59.44. Last quarter, the pattern reversed again: a ~167% increase at prices between $41.84 and $55.83. This quarter, the entire stake was sold at prices between $40.94 and $50.64. The stock currently trades at $52.99.
Stake Increases:
Actavis plc (ACT): ACT is the second-largest individual stock position at 9.83% of the US long portfolio. It was established in Q1 2014 at prices between $168 and $227. The stake was increased by ~15% in Q3 2014 at prices between $203 and $248 and another 20% last quarter at prices between $217 and $271. This quarter saw a minor increase as Loeb received some shares due to the acquisition of Allergan by Actavis - Third Point had a small Allergan stake. The stock currently trades at $301.
Anheuser Busch (BUD) and Calls: BUD is a 3.10% of the US long portfolio position established in Q1 2014 at prices between $94 and $107. The stake was increased by ~30% in Q2 2014 at prices between $105 and $116. Last three quarters have seen a combined ~57% increase at prices between $104 and $128. The stock currently trades at $123. The aggressive build-up indicates a clear bullish bias.
Delta Air Lines (DAL): The 2.18% DAL position was established last quarter at prices between $30.90 and $49.23 and increased by just over one-third this quarter at prices between $41.64 and $50.74. The stock currently trades at $43.18. The activity indicates a bullish bias.
eBay Inc. (EBAY): EBAY is a large top-five position at 6.13% of the US long portfolio. The stake was established in Q3 2014 at prices between $50 and $56.63 and increased by ~120% last quarter at prices between $47.88 and $57.53. This quarter saw another 15% increase at prices between $53 and $60.81. The stock currently trades at $59.73. eBay has seen significant super-investor interest as both Carl Icahn and Seth Klarman added stakes.
FleetCor Technologies (FLT): FLT was a minutely small position in Q3 2014. It was increased substantially last quarter at prices between $123 and $156. This quarter also saw a ~27% increase at prices between $137 and $157. The stock currently trades at $154 and the stake is at ~1% of the US long portfolio.
IAC InterActive (IACI): IACI is a 1.49% of the US long portfolio position purchased in Q2 2014 at prices between $62 and $70 and increased by ~19% last quarter at prices between $58.48 and $67.88. This quarter saw a marginal increase. The stock currently trades at $75.92.
Mohawk Industries (MHK): The 3.13% MHK position was established last quarter at prices between $125 and $158. It was increased by ~180% this quarter at prices between $153 and $186. The stock currently trades at $187.
Roper Technologies (ROP) formerly Roper Industries: The 2.54% ROP stake was purchased in Q1 2014 at prices between $132 and $142. It was increased by ~23% this quarter at prices between $146 and $174. The stock currently trades at $177.
Stake Decreases:
Ally Financial (ALLY): ALLY is a top-five stake at 5.04% of the US long portfolio. The position was established in Q2 2014 as a result of its IPO in April 2014. Loeb started investing in ALLY in 2011 through unsecured debt and preferred securities. Last quarter saw a ~28% reduction at prices between $20.12 and $24.95 and this quarter saw a further ~13% reduction at prices between $18.71 and $23.88. He still holds 5.42% of the shares outstanding. The stock currently trades at $22.63 compared to the IPO price of $24.
Amgen Inc. (AMGN): A very small stake in AMGN was established in Q2 2014. It was increased by almost 200% in Q3 2014 at prices between $115 and $144. Last quarter, the position was increased by a whopping ~700% at prices between $130 and $172. It is currently Third Point's largest stake at 14.77% of the US long portfolio. This quarter saw a ~6% trimming at prices between $150 and $170. The stock currently trades at $164.
Note: Dan Loeb has said AMGN was the biggest winner in the portfolio for 2014. The buy thesis is based around the idea that efficient capital allocation along with splitting the company into a mature business and growth business should unlock tremendous value over the next two years ($249 price-target).
Intrexon Corporation (XON): The original XON stake was acquired in 2011 when the company was private. The position is very small at 1.13% of the US long portfolio. This quarter saw a ~6% reduction. The stock currently trades at $42.60 compared to the Q3 2013 IPO price of $29.
Phillips 66 (PSX): PSX is a medium-sized 2.91% of the US long portfolio position established last quarter at prices between $65 and $81.31. It was reduced by ~20% this quarter at prices between $59 and $80. The stock currently trades at $80.97.
SunEdison Inc. (SUNE): SUNE is a 2.25% position established in Q3 2014 at prices between $18.88 and $24.05 and increased by ~88% last quarter at prices between $14.30 and $22.86. This quarter saw a ~10% reduction at prices between $17.59 and $24.85. The stock currently trades at $30.67.
Kept Steady:
American International Group (AIG): AIG is a 1.77% of the US long portfolio stake established last quarter at prices between $49.40 and $56.51. The stock currently trades at $59.88. Loeb reentered the stock after a quarter's gap: 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. Loeb realized large gains from that stake exiting at prices between $35 and $56.33.
Constellation Brands (STZ) and Calls: The 2.15% STZ position was first purchased in 2012 and has only seen marginal activity since. Last quarter saw a ~4% reduction.
Dollar General (DG): DG was first purchased in 2012 and the position has wavered since. The stake is at 2.79% of the portfolio currently. Last significant activity was a one-third increase in Q2 2014 at prices between $53.50 and $62.82. The stock currently trades outside that range at $73.56.
Note: Dollar General was involved in a hostile takeover of Family Dollar (FDO). In January, they formally ended the process as Dollar Tree (DLTR) succeeded in gaining shareholder approval in their bid for FDO.
Dow Chemical (DOW): DOW is currently Third Point's third-largest individual stock position at 9.76% of the US long portfolio. The original stake was established in Q4 2013 at prices between $38.30 and $45. In Q2 2014, the position was increased by just over 180% at prices between $46.95 and $53.15 and the following quarter saw an additional one-third increase at prices between $51 and $55. Last quarter saw an about-turn as ~24% of the position was disposed of at prices between $42.71 and $52.84. The stock currently trades at $51.29. 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 ~5% but the ten-year return is depressing at less than 12% (excluding dividends).
Energizer Holdings (ENR): The 1.28% ENR position was established in Q3 2014 in the $115 to $125 price-range and it currently trades at $145. ENR is on track to split into a Household Products business and a Personal Care Products business in July 2015.
Enphase Energy (ENPH): ENPH has been in the portfolio since its 2012 IPO - the position had remained untouched ever since. Q3 2014 saw a ~16% reduction at prices between $8.55 and $17.39. 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 ~14% of the company. Loeb revealed that at the time of IPO, the investment already had a ~20% IRR. It has been a volatile stock trading as low as $2 in November 2012. It currently trades at $9.95.
Liberty Global (LBTYA) (LBTYK): LBTYK is a medium-sized 2.67% of the US long portfolio position. LBTYK has been in the portfolio since 2011. The stock currently trades at $53.76.
Masco Corporation (MAS): MAS is a 2.47% of the US long portfolio position established in Q1 2014 at prices between $20.74 and $23.63. It was increased by ~80% in Q2 2014 at prices between $19.54 and $22.89 and another ~24% last quarter at prices between $20.86 and $25.40. The stock currently trades outside those ranges at $27.34.
Sotheby's (BID): BID is a 2.60% 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. The stock currently trades at $45.38. For investors attempting to follow Third Point, BID is a very good option to consider for further research.
Note: BID is an activist stake. 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. Last March, Third Point got 3 board seats, and in March this year, Tad Smith was appointed as the new CEO.
Sensata Technologies (ST): ST is a 2.12% of the US long portfolio position established in Q1 2014 at prices between $36.78 and $42.90. The stake was increased by ~62% in Q2 2014 at prices between $41.59 and $46.78 and another two-thirds the following quarter at prices between $45.15 and $49.76. Last quarter saw a ~20% reduction at prices between $41.67 and $53.70. The stock currently trades at $55.52.
The 13F portfolio also has the following minutely small (less than 0.5% of the portfolio each) stakes: Citigroup Warrants (C.WS.A), Clayton Williams Energy (CWEI), Energy Transfer Equity LP (ETE), Green Brick Partners (GRBK), JD.com (JD), Moelis & Company (MC), and a debt holding - Cobalt International Energy (CIE) notes. The following minutely small positions as of last quarter were eliminated this quarter: FCB Financial Holdings (FCB) and Rice Midstream Partners (RMP). Loeb controls ~6.6% of CWEI and ~17% of GRBK. In addition to partner stakes, Third Point also invests the float of Third Point Reinsurance (TPRE).
The spreadsheet below highlights changes to Loeb's US stock holdings in Q1 2015:
