Dan Loeb's Third Point Offshore Fund is out with its monthly update on positioning and exposures. The key takeaway here is that Third Point has initiated a position in gas producer El Paso (EP) since the fourth quarter.
The second most notable takeaway is that Potash (POT) is no longer among its top holdings. The stock sold-off hard recently, so that could be the culprit. Or, perhaps the fund sold shares, other holdings appreciated in value, or Third Point ramped up its stakes in other names; it's tough to discern.
Third Point's Top Positions
Gold
Delphi (both equity & debt)
Chrysler (multiple securities owned)
El Paso (EP)
LyondellBasell (LYB)
Some of the fund's top winners were gold, NXP Semiconductors (NXPI), El Paso (EP), Technicolor (multiple securities owned), and Williams Companies (WMB). Per its latest disclosure, Third Point also now owns multiple securities in NXPI after previously owning just the equity.
El Paso is the second gas related entity Third Point has invested in recently. Third Point bought WMB in the fourth quarter, as did many other hedge funds. You can read about the investment thesis on WMB in the equity analysis section of our new issue of Hedge Fund Wisdom.
The top losers last month in Third Point's portfolio included Wells Fargo (WFC), BioFuel Energy (OTCQB:BIOF), CIT Group (CIT), Accuride (ACW), and Rentokil Initial PLC (RTO in London, RTOKY.PK on the pink sheets). Wells Fargo also appears to be a new equity position for the hedge fund, unless it is a debt stake that has previously been undisclosed; the disclosure is unclear.
Overall, Loeb favors post-reorganization equities. In particular, he's been active in Smurfit-Stone Container (OTCPK:SSCC), opposing the takeover. LyondellBasell (LYB), another post-reorg equity, continues to be one of Loeb's largest positions.
For the month of February, Third Point was up 3.6% and is up 7.6% for 2011 thus far. Its Offshore Fund has now seen an impressive 19% annualized return since inception in December 1996.
Exposure Levels
Regarding its latest exposure levels, Third Point is 56.2% net long equities with its largest net long exposure in basic materials at 12.1% and consumer at 11.5%. Over the past month or so, Third Point has reduced net long equity exposure by almost 5%.
In credit, the hedge fund is 11.5% net long distressed, 16.5% net long asset backed securities (ABS) which include residential mortgage backed securities (RMBS) and commercial mortgage backed securities (CMBS). The fund is also net short -5.4% government securities, cutting its short exposure to this asset class almost in half.
For a full assessment of Loeb's portfolio and the investment thesis behind some of his picks, head to the brand new issue of Hedge Fund Wisdom that was just released.
