Tracking Dan Loeb's Third Point Portfolio - Q4 2016 Update

| About: Third Point (TPRE)

Summary

Dan Loeb's 13F portfolio decreased from $11.50B to $10.19B this quarter. The number of positions remained steady at 38.

Third Point added JPMorgan Chase & Bank of America, while increasing Humana & Constellation Brands. The large Allergan stake was dropped.

The top three 13F positions are Baxter International, Dow Chemical, and Humana, which together are ~37% of the portfolio.

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 02/10/2017. 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 Q3 2016.

The 13F portfolio is very concentrated, with the top three holdings accounting for 36.94% of the entire portfolio. Recent 13F reports show around 40 long positions. This quarter, Loeb's US long portfolio decreased 11.42%, from $11.50B to $10.19B. The number of holdings remained steady at 38. The five largest individual stock positions are Baxter International (NYSE:BAX), Dow Chemical (DOW), Humana (NYSE:HUM), Constellation Brands (NYSE:STZ), and JPMorgan Chase (NYSE:JPM).

Per their Q4 2016 investor letter, Third Point returned 6.1% for the year. Annualized returns since December 1996 inception are at 15.7%. In addition to partner stakes, Third Point also invests the float of Third Point Reinsurance (NYSE:TPRE).

To know more about Dan Loeb's Third Point, check out his letters to shareholders at their site. His activist investing style is covered in the book "The Alpha Masters: Unlocking the genius of the world's top hedge funds".

New Stakes:

JPMorgan Chase, Bank of America (NYSE:BAC), PrivateBancorp (NASDAQ:PVTB), and Goldman Sachs (NYSE:GS): These are the four new financial stocks added this quarter. Together, they are at ~11% of the portfolio. The top five 4.45% portfolio stake in JPM was purchased at prices between $66.50 and $87, and it is now at $87. The 3.80% position in BAC was established at prices between $15.50 and $23, and the stock is currently at $23.08. The small 1.60% PVTB stake was purchased at prices between $44 and $55, and it now goes for $56.29. The very small 0.94% position in GS was established at prices between $161 and $243, and it currently trades at $243.

Note: The new stake in financials was discussed in Third Point's Q4 2016 letter. Basically, they are very bullish and have continued purchasing shares in 2017.

Time Warner Inc. (NYSE:TWX) and Zayo Holdings (NYSE:ZAYO): These are medium-sized positions established this quarter. The 2.84% TWX stake was established at prices between $78.50 and $97, and the stock is now at $96.58. ZAYO is a 2.26% position purchased at prices between $29.50 and $35, and it currently trades at $31.35.

Note: In October last year, AT&T (NYSE:T) agreed to acquire Time Warner in a cash and stock ($53.75 cash) deal worth $107.50 per share.

Honeywell International (NYSE:HON), Anthem Inc. (NYSE:ANTM), HD Supply Holdings (NASDAQ:HDS), Rice Energy (NYSE:RICE), Southwestern Energy (NYSE:SWN), and Broadcom Ltd. (NASDAQ:AVGO): These are small stakes (less than ~1.5% of the portfolio each) established this quarter.

Stake Disposals:

Allergan plc (NYSE:AGN): AGN was the third-largest individual stock position at 7.58% of the US long portfolio as of last quarter. 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% the following quarter at prices between $217 and $271. Q4 2015 saw another ~50% increase at prices between $253 and $322. The pattern reversed last quarter: ~30% selling at prices between $230 and $260. The disposal this quarter was at prices between $188 and $243. The stock currently trades at $246.

Anheuser Busch (NYSE:BUD) and Calls: BUD was a 1.83% 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. The following four quarters had seen a combined ~70% increase at prices between $106 and $127. In H2 2015, the position was reduced by ~60% at prices between $104 and $129. The pattern reversed again in Q1 2016: a ~25% increase at prices between $112 and $127. The entire remaining stake was sold out this quarter at prices between $100 and $131. The stock currently trades at $106.

Yum! Brands (NYSE:YUM) and Calls: YUM was a large position established in Q1 2015 at prices between $70 and $82 and increased by ~200% in Q3 2015 at prices between $76 and $92. In Q4 2015, the position was almost eliminated at prices between $67 and $83.50. It was built back up to a top-five 5.28% of the portfolio stake in Q1 2016 at prices between $65 and $82. In Q2 2016, the pattern reversed again: around two-thirds reduction at prices between $79 and $86. That was followed with another ~80% reduction last quarter at prices between $83 and $92. The remaining minutely small stake was disposed of this quarter. The stock is now at $68.

Liberty Global (NASDAQ:LBTYA): LBTYA was a very small 0.89% of the portfolio stake established in Q2 2016 at prices between $27 and $40 and increased by ~50% last quarter at prices between $27.50 and $34.50. The position was sold out this quarter at prices between $29.50 and $34. The stock currently trades at $35.36.

Note: Liberty Global had a previous roundtrip. It was a 2.07% position established in 2011 and disposed in Q1 2016.

Alibaba Group Holdings (NYSE:BABA), St. Jude Medical (NYSE:SJM), Visa Inc. (NYSE:V), and Williams Companies (NYSE:WMB): These small (less than ~2.5% of the portfolio each) stakes established last quarter was eliminated this quarter. BABA and WMB have seen previous roundtrips in the portfolio.

Ametek Inc. (NYSE:AME), Apigee Corp. (NASDAQ:APIC), Citigroup Warrants (C.WS.A), and Shire plc (NASDAQ:SHPG): These very small (less than ~1.5% of the portfolio each) stakes were disposed of this quarter.

Note: Loeb controlled ~10.5% of Apigee as of last quarter. It was acquired by Alphabet (GOOG, GOOGL) for $17.40 per share, and the transaction closed in November last year. Loeb profiled Apigee in his Q3 2016 letter; it was a PE portfolio business with the first investment in 2008. Overall, the investment returned 20% IRR over the holding period.

Stake Increases:

Humana Inc.: HUM is currently the third-largest stake at 4.81% of the portfolio. It was established last quarter at prices between $153 and $180 and increased by ~70% this quarter at prices between $165 and $217. The stock is now at $205.

Constellation Brands and Calls: The top-five 4.51% STZ position was established in 2012. The last three quarters had seen a combined ~38% increase at prices between $135 and $168. There was another ~36% increase this quarter at prices between $145 and $171. The stock is currently at $156. For investors attempting to follow Loeb, STZ is a good option to consider for further research.

Note: STZ investment was profiled in Third Point's Q2 2015 partner letter. The thesis was that even after the tremendous price appreciation over the previous three years, the stock still traded at only 16x 2017 EPS forecast - there is opportunity for the multiple to re-rate, as consumer staples businesses with growth in volumes, sales, and earnings trade at significantly higher multiples. At the time, the stock traded at ~$117.

Sherwin-Williams (NYSE:SHW): The 2.64% SHW stake was acquired in Q2 2016 at prices between $280 and $312. Last quarter saw a 25% increase at prices between $274 and $312. That was followed with another ~14% increase this quarter at prices between $241 and $278. The stock is currently at $307.

Mohawk Industries (NYSE:MHK): The 2.35% MHK position was established in Q4 2014 at prices between $125 and $158 and increased by ~180% the following quarter at prices between $153 and $186. Q2 2015 also saw a one-third further increase at prices between $174 and $194. The last five quarters had seen a combined ~62% selling at prices between $150 and $215. There was an about-turn this quarter: a one-third increase at prices between $177 and $205. The stock currently trades at $223.

Dell Technologies (NYSE:DVMT): DVMT is a small 1.40% stake established last quarter and increased by ~13% this quarter.

Stake Decreases:

Dow Chemical: DOW is currently Third Point's second-largest individual stock position at 9.55% of the US long portfolio. The original stake was established in Q4 2013 at prices between $38 and $45. In Q2 2014, the position was increased by just over 180% at prices between $47 and $53, and the following quarter saw an additional one-third increase at prices between $51 and $55. Q4 2014 saw an about-turn as ~24% of the position was disposed at prices between $43 and $53. Q2 2016 saw another~20% reduction at prices between $49 and $54, and that was followed with a ~15% trimming this quarter at prices between $52 and $59. The stock currently trades at $61.19.

Note: DOW is an activist stake. In December 2015, Dow and DuPont (DD) announced a merger of equals with plans to separate into three businesses after the merger.

Facebook Inc. (NASDAQ:FB): FB is a fairly large ~4% of the portfolio stake established in Q2 2016 at prices between $109 and $121 and increased by ~45% last quarter at prices between $114 and $131. This quarter saw the position reduced by ~36% at prices between $115 and $133. The stock is now at $134.

Alphabet Inc.: GOOG is a 3.31% stake established in Q1 2016 at prices between $678 and $765. It was reduced by ~43% in the following quarter at prices between $668 and $767. Last quarter saw a ~38% increase at prices between $692 and $787, while there was a ~23% selling this quarter at prices between $736 and $813. The stock is currently at $814.

Note: GOOG has seen a previous roundtrip in the portfolio. A fairly large 3.44% of portfolio stake was sold in Q2 2014 at prices between $510 and $579. That position was from Q3 2013 at prices between $423 and $435.

Danaher Corp. (NYSE:DHR): The 2.48% DHR stake was established in Q3 2015 at prices between $60.90 and $71.50 and increased by two-thirds in Q1 2016 at prices between $62 and $74. It currently trades at $83.98. Last quarter saw a ~17% increase, while this quarter saw a ~28% selling.

Note: The investment in DHR is profiled in Third Point's Q1 2016 partner letter. They believed the spin-off of Fortive (NYSE:FTV) that closed in July 2016 will unlock significant value. The prices quoted above are adjusted for that transaction.

Charter Communications (NASDAQ:CHTR): CHTR is a 2.40% of the portfolio position established in Q2 2016 as a result of the merger of Charter Communications and Time Warner Cable that closed in May - Third Point had around 1.2M shares of Time Warner Cable. Third Point also more than doubled the stake at prices between $198 and $233. Last quarter saw a ~30% reduction at prices between $229 and $278, and that was followed with another ~15% trimming this quarter. The stock is now at $325. Third Point is harvesting gains.

General Dynamics (NYSE:GD): GD was a very small 0.47% portfolio stake as of Q2 2016. Last quarter saw a huge ~280% increase at prices between $138 and $156. The stock is now above that range at $184, and the position is at 2.20% of the portfolio. There was marginal selling this quarter.

Monsanto Co. (NYSE:MON) and S&P Global (NYSE:SPGI): These two positions were established in Q2 2016 and increased significantly last quarter. The 1.14% MON stake was purchased at prices between $86 and $113. This quarter, the position was sold down by ~70% at prices between $98 and $106, and the stock is now at $108. SPGI is a 1.69% position established at prices between $96 and $128. This quarter saw a ~20% reduction at prices between $108 and $127. The stock is now at $126.

Note: Bayer AG (OTCPK:BAYRY) is acquiring Monsanto for $128 per share cash.

Chubb Ltd. (NYSE:CB) (previously Ace Ltd.): CB is a 1.56% of the portfolio stake established in Q4 2015 and increased by ~60% the following quarter at prices between $101 and $123. The stock currently trades above that range at $133. Last quarter saw a ~23% reduction at prices between $124 and $131, and that was followed by a one-third selling this quarter at prices between $122 and $133.

Note: Ace Limited acquired Chubb, and it closed in January 2016. After the transaction, Ace Limited adopted the Chubb name.

TransDigm Group (NYSE:TDG): TDG is now a very small 0.61% position. The original stake was purchased in Q1 2016 at prices between $187 and $230 and increased by ~13% the following quarter at prices between $219 and $267. The position was reduced by ~80% this quarter at prices between $245 and $290. The stock currently trades at $253.

Apple Inc. (NASDAQ:AAPL) and Conagra Foods (NYSE:CAG): These two small (less than ~2% of the portfolio each) stakes established last quarter saw significant selling this quarter. AAPL was reduced by ~25% and CAG by ~30%.

Note: Apple has seen previous roundtrips in the portfolio.

Nomad Foods (NYSE:NOMD), Grupo Supervielle SA (NYSE:SUPV), and Union Pacific (NYSE:UNP): These very small stakes (less than ~1% of the portfolio each) were further reduced this quarter.

Note: Third Point controls ~6.7% of Nomad Foods.

Kept Steady:

Baxter International: BAX is Loeb's largest position at 22.59% of the US long portfolio. The stake was established in Q2 2015 and increased substantially the following quarter at a cost basis of $40.44. The stock currently trades at $49.

Sotheby's (NYSE:BID): BID is a 2.61% of the US long portfolio position first purchased in Q1 2013. The bulk of the current position was purchased in Q3 2013 at prices between $39 and $51. The stock currently trades at $41. Third Point's ownership stake in BID is at ~12%.

Note: BID is an activist stake. Third Point has three board seats, and in March 2015, Tad Smith was appointed as the new CEO.

Molson Coors Brewing (NYSE:TAP): The 1.62% TAP stake was established in Q2 2015 at prices between $69.50 and $79, and more than doubled the following quarter at prices between $65 and $84.50. Q2 2016 saw a ~54% reduction at prices between $92 and $104. The pattern reversed again last quarter: a ~70% increase at prices between $93 and $110. The stock currently trades at $95.95.

Enphase Energy (NASDAQ:ENPH), Green Brick Partners (NASDAQ:GRBK), and Kadmon Holdings (NYSE:KDMN): These minutely small positions (less than 0.5% of the portfolio each) were kept steady this quarter.

Note 1: The bulk of the stake in Kadmon Holdings is from prior to its IPO in July 2016 (PE investment). The biopharma was founded in 2010 by Sam Waksal (ImClone insider trading conviction and 7-year prison term infamy, circa 2003).

Note 2: Loeb controls ~11% of Enphase Energy, ~25% of Green Brick Partners (previously BioFuel Energy) and ~17.5% of Kadmon Holdings.

The spreadsheet below highlights changes to Loeb's US stock holdings in Q4 2016:

Disclosure: I am/we are long BAC, DOW.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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.

About this article:

Expand
Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.
Tagged: , , , Property & Casualty Insurance
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here