Investing

Dan Loeb's Third Point Cuts Disney and More to Bolster Tech Exposure in Q1

Ben Ward

Published: May 17, 2023 10:49 pm

Daniel Loeb’s New York-based hedge fund Third Point LLC this week reported its latest trades and movements for the March quarter.

Known for the firm’s aggressive investment strategies and relentless pursuit of profits, Loeb is often seen as an unapologetic activist investor. He has built a reputation for shaking up established companies and pushing for change in their management and operations.

With an uncanny ability to identify undervalued assets and overlooked opportunities, he has made a name for himself as a shrewd and savvy investor. However, his methods have not been without controversy, as critics argue that his relentless pursuit of short-term gains may come at the expense of long-term stability and sustainable growth.

Whether one sees Dan Loeb as a bold pioneer or a reckless disruptor, Third Point’s presence and influence cannot be ignored.

Holdings Increased

During the first quarter of 2023, Third Point’s total number of holdings edged up, from 44 to 46 positions and the fund’s value reported to the SEC was 2.4% larger, to $6.11 billion by the close of March.

Despite that increase in fund size, it remains significantly below highs above $18 billion reached during the pandemic.

The top five positions in the fund currently by size are: PG&E Corporation (US:PCG) [15.68%],  Colgate-Palmolive (US:CL) [13.59%], Danaher Corporation (US:DHR) [11.34%], Bath & Body Works, Inc. (US:BBWI) [8.23%] and Alphabet Inc (US:GOOGL, US:GOOG) [8.06%].

Largest Increases

Third Point bet big on Alphabet with a new position worth $492.72 million, accounting for 8.06% of the portfolio. The surge in allocation indicates a strong bullish stance on the tech giant, suggesting that Leob thinks the share price momentum in 2023 will likely continue its upward trend towards all-time highs.

Another stock that saw a remarkable surge in the hedge fund’s portfolio allocation was a new position in HCA Healthcare (US:HCA). The position fund valued at $227 million equated to a portfolio allocation of 3.71% and signalled confidence in the healthcare sector. Although the stock is trading around all-time highs, its PE ratio of around 14x is not demanding and below many sector peers.

A new position was started in Salesforce (US:CRM) worth $160 million equating to 2.62% of the total portfolio. The purchase comes at a reasonable time when the stock has shown a confirmed uptrend, recovering substantial losses from all time highs which saw shares more than halve over 2022. Valuation concerns were the primary driver of the decline last year as rising interest rates drove a selloff in premium priced stocks.

Asian e-commerce giant Alibaba (US:BABA) was the fourth-most significant trade during the quarter with a new $135 million position worth 1.72% of the fund. The conglomerate recently announced plans to split the company into six new groups which could substantially increase shareholder value in its new structure. The six new groups will be: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Service Group, Cainiao Smart Logistics, Global Digital Commerce Group and Digital Media and Entertainment Group.

The hedge fund purchased 2 million shares in National Instruments (US:NATI) worth $105 million. This was a likely arbitrage opportunity with the stock currently amid a takeover offer from Emerson (US:EMR) at $60 per share.

Other new positions by the fund included Advanced Micro Devices (US:AMD), Wesco International (US:WCC) and Micron Technology (US:MU). The fund also purchased another 1 million shares in Dow Inc (US:DOW), increasing its allocation to 4.7% in the stock.

Top Decreases

Third Point continued its sell-down of SentinelOne Inc (US:S) during the quarter and had completely exited the cybersecurity stock by the close. SentinelOne continues to struggle to recover losses from 2022, lagging peers in the index.

Loeb sold half of the position in United Health (US:UNH) with 335,000 shares remaining in his control at the end of the quarter, worth $158 million. The position had 2.59% allocation at the close of the quarter with the stock trending sideways over 2023.

The fund sold down 42% of its shares held in insurance conglomerate American International Group (US:AIG) with $149 million remaining worth 2.43% of the fund.

The Colgate Palmolive position was trimmed slightly by 4.33% to $830 million or 13.59% of the portfolio.

The allocation to Bath & Body Works was cut by 1.48% to an 8.23% allocation. The fund did not sell any shares but instead the stock price declined 15% of the period, explaining the reduction. Shares have further continued to slide further post quarter, bringing the year to date loss to around 25%.

Other positions that were also fully exited included TJX Companies (US:TJX), Ovintiv Inc (US:OVV), Walt Disney Co (US:DIS) and Fidelity National Information Services (US:FIS).

Notably, hedge fund maven Steven Cohen’s Point72 also sold FIS shares in Q1, paring the holdings by two-thirds, to an 0.49% exposure worth $157 million.

Third Point’s exit from Disney follows the company’s adding a new board member last September in response to Loeb’s activist stance.

This article originally appeared on Fintel