This article is part of a series that provides an ongoing analysis of the changes made to Dan Loeb’s 13F stock portfolio on a quarterly basis. It is based on Third Point’s regulatory 13F Form filed on 11/14/2019. 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 Q2 2019.

The 13F portfolio is very concentrated with the top three holdings accounting for ~37% of the entire portfolio. Recent 13F reports show around 40 long positions. This quarter, Loeb’s portfolio value decreased marginally from $8.54B to $8.42B. The number of holdings decreased from 42 to 40. The largest five individual stock positions are Baxter International (NYSE:BAX), United Technologies (NYSE:UTX), Campbell Soup (NYSE:CPB), Allergan plc (NYSE:AGN), and Danaher Corp. (NYSE:DHR).

Per their Q3 2019 letter, Third Point gained 12.7% YTD compared to 20.6% for the S&P 500 Index. Annualized returns since December 1996 inception are at 14.5% compared to 8.5% for the S&P 500 Index. AUM is distributed among several strategies of which the long/short equity portion accounts for ~40%. In addition to partner stakes, Third Point also invests the float of Third Point Reinsurance (TPRE) and capital from London listed closed-end fund Third Point Offshore (OTC:TPNTF). 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.”

Note: Large equity investments not in the 13F report include Sony (SNE), EssilorLuxottica (OTCPK:ESLOY), and Nestle (OTCPK:NSRGY). All three are activist stakes. SNE is a $1.5B investment made in June when the stock was trading at around $50 per share. It is currently at ~$62. In a presentation on Sony released later that month, Third Point urged management to split the semiconductor business so as to transform Sony’s core businesses into an entertainment behemoth (PlayStation, Music, and Video). The ESLOY investment was made early this year when the stock was trading at ~$62.50 per share. It currently trades at ~$77. For investors attempting to follow, these two are good options to consider for further research. The NSRGY position is from 2017 and the stock has rallied over 50% since.

New Stakes:

Allergan plc: AGN is large (top five) merger arbitrage stake established this quarter at prices between $156 and $170. The stock currently trades at $185. In June, AbbVie (ABBV) agreed to acquire Allergan in a cash-and-stock ($120.30 per share cash and 0.8660 shares of ABBV for each share of AGN held) deal.

Fidelity National Information Services (FIS) and Five Below (FIVE): The 3.94% FIS position came about as a result of FIS acquiring WorldPay in a cash-and-stock transaction (0.9287 FIS shares and $11 cash for each share held) that closed in July. Third Point had a ~3% of the portfolio (2.2M shares) position in WorldPay. It was established in the 2017-2018 timeframe at a cost basis of ~$70 per share. FIS currently trades at $137. The FIS stake was also increased by ~25% during the quarter at prices between $125 and $140. FIVE is a small 1.27% of the portfolio stake purchased at prices between $104 and $135 and the stock is currently at ~$125.

Ansys Inc. (ANSS), Afya Ltd. (AFYA), Envista Holdings (NVST), Essential Properties (EPRT), GoDaddy Inc. (GDDY), HD Supply Holdings (HDS), SmileDirectClub Inc. (SDC), and Zendesk (ZEN): These are minutely small positions established during the quarter.

Stake Disposals:

Worldpay Inc. (WP): WP was a ~3% portfolio stake built in H2 2017 at prices between $60 and $76. There was a ~30% reduction in Q2 2018 at prices between $78 and $85. Q1 2019 also saw a ~14% selling. Fidelity National Information Services acquired WorldPay in a cash-and-stock transaction (0.9287 FIS shares and $11 cash for each share held) that closed in July thereby eliminating this position.

Marathon Petroleum (MPC) and Netflix, Inc. (NFLX): These two medium-sized positions established in Q1 2019 were disposed this quarter. The 2.67% MPC stake was purchased at prices between $57.50 and $67 and disposed at prices between $44.50 and $62.50. The stock currently trades at $62.43. NFLX was a 2.15% position established at prices between $268 and $378 and disposed at prices between $255 and $382. The stock now goes for $316.

Note: These two have seen previous round-trips. The stakes were at 2.18% and 3.64%, respectively, as of Q3 2018 but were disposed next quarter.

Chemours Co. (CC): CC was a 1.23% of the portfolio stake established in Q1 2019 at prices between $29 and $41. It saw a stake doubling last quarter at prices between $21 and $41. The position was eliminated this quarter at prices between $12 and $22.50. The stock currently trades at $16.60.

Ross Stores (ROST): ROST was a 1.66% portfolio stake established in Q1 2019 at prices between $83 and $95. The disposal this quarter was at prices between $98 and $110. The stock is now at $113.

CrowdStrike Holdings (CRWD), Frank’s International (FI), Linx S A (LINX) ADR, Parsons Corp. (PSN), Pinterest, Inc. (PINS), Twilio Inc. (TWLO), VICI Properties (VICI), and Zoom Video Communications (ZM): These very small positions (less than ~0.5% of the portfolio each) were disposed during the quarter.

Stake Increases:

Salesforce.com (CRM): The 2.31% CRM position was more than doubled in Q4 2018 at prices between $121 and $160. Last quarter saw a ~11% further increase. This quarter saw the position almost doubled again at prices between $140 and $160. The stock is now at $162.

Burlington Stores (BURL): The 3.56% portfolio stake in BURL was established last quarter at prices between $146 and $177. The position saw a ~115% stake increase this quarter at prices between $168 and $205. The stock currently trades at $208.

Iqvia Holdings (IQV): The 3.55% IQV position was purchased in Q3 2018 at prices between $99 and $131 and increased by ~25% this quarter at prices between $143 and $162. The stock currently trades above that at ~$147.

S&P Global (SPGI): SPGI is a 2.33% position established in Q2 2016 at prices between $96 and $128. The position has wavered. Recent activity follow: the five quarters through Q1 2019 had seen a combined ~58% reduction at prices between $164 and $213. The stock is now at ~$266. There was a ~5% stake increase this quarter.

iShares 1-3 year treasury bond: The iShares 1-3 year treasury bond position is a minutely small 0.04% stake that was increased during the quarter.

Stake Decreases:

Baxter International: BAX is Loeb’s largest position at ~18% of the 13F portfolio. The stake was established in Q2 2015 and increased substantially the following quarter. Recent activity follow: December 2018 saw a ~22% selling (8M shares) at $68.62 and that was followed with another ~18% selling (5M shares) last quarter at $76.37. Both these were block trades. Loeb’s cost basis on BAX is $40.05. This quarter also saw a ~27% selling at prices between $81 and $90. The stock currently trades at ~$82. Loeb is harvesting huge long-term gains.

Campbell Soup: The large (top three) ~9.5% CPB stake was established in Q2 2018 and increased next quarter. The bulk of the position was purchased at prices between $35 and $42. There was a ~17% stake increase in Q1 2019 at prices between $32 and $41. The stock is now at $46.80. Last two quarters have seen a combined ~20% selling at prices between $36 and $47.

Note: CPB position is an activist stake. Third Point initially pursued the replacement of the entire 12-member board but has since settled for two board seats in a truce with management. The standstill agreement through this month also stipulates Third Point not to raise ownership stake beyond ~9%. The ownership position is currently at 5.74%.

PayPal Holdings (PYPL): PYPL is a 3.32% of the portfolio stake established in Q2 2018 in the low-80s. The stock is currently at ~$105. The stake saw a ~55% reduction in Q4 2018 at prices between $75 and $89 and that was followed with a ~13% trimming next quarter.

Fox Corp. (FOX): FOX is a ~3% of the portfolio position purchased in Q1 2019 at prices between $28.75 and $39.55 and the stock is now at $34.85. There was a ~8% stake increase last quarter while this quarter there was a ~24% selling at prices between $31 and $38.

Adobe Systems (ADBE): ADBE is a 2.71% stake that saw a ~75% increase in Q2 2018 at prices between $212 and $258 and another ~30% increase next quarter at prices between $242 and $275. Last quarter saw a minor ~3% further increase while this quarter there was a ~11% trimming. The stock is now at $305.

Boston Scientific Corp. (BSX): The 2.42% BSX stake was established in Q1 2019 at prices between $33 and $41. That was followed with a ~10% increase last quarter. The stock is now at $42.85. This quarter saw a ~9% trimming.

Centene Corp. (CNC): The 1.54% CNC stake was purchased in May at around ~$55 per share compared to the current price of $61.17. This quarter saw a ~4% trimming.

Note: On Centene, it was reported in May that Third Point wants the company to consider selling itself before spending $15.3B for the acquisition of WellCare Health (WCG).

Clear Channel Outdoor (CCO) and Tradeweb Markets (TW): These very small positions (less than ~0.5% of the portfolio each) were decreased during the quarter.

Kept Steady:

United Technologies (UTX): UTX is a large (top three) ~10% of the portfolio position established in Q1 2019 at prices between $104 and $129. The stock currently trades at ~$148. Last quarter saw a ~7% trimming.

Note: UTX has seen a previous roundtrip. A similarly sized large stake was disposed in Q4 2018 and the position was rebuilt next quarter.

Danaher Corp.: The ~6% 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 well above those ranges at ~$145. There was a ~20% stake increase in Q1 2019 at prices between $98 and $132.

Note: The prices quoted above are adjusted for the Fortive (FTV) spin-off in July 2016.

Sotheby’s (BID): BID was a 4.51% of the portfolio position first purchased in Q1 2013. The bulk of the stake was purchased in Q3 2013 at prices between $39 and $51. Third Point’s ownership stake in BID was ~14%. In June, the stock spiked following an acquisition agreement at $57 per share in a going-private transaction. The transaction closed last month.

Visa Inc. (V): The ~3% V stake was established in Q2 2018 at prices between $118 and $136. The stock is now well above that range at ~$181.

Far Point Acquisition (FPAC) & Units: The ~2% position established in Q2 2018 has since been kept steady.

Note: Far Point Acquisition is a SPAC that Third Point co-sponsored. It will have a focus on Financial Technology. Ex-NYSE (Intercontinental Exchange subsidiary) President Tom Farley is CEO.

Microsoft Corp. (MSFT): MSFT is a small ~1% position purchased in Q1 2019 and increased by ~20% last quarter at prices between $97 and $138. The stock is currently at ~$151.

Kadmon Holdings (KDMN): The minutely small 0.28% stake in KDMN was kept steady this quarter.

Note: 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). Loeb controls ~8% of Kadmon Holdings (KDMN).

Americold Realty (COLD), Black Knight, Inc. (BKI), Colfax Corp (CFX), GTT Communications (GTT), Grocery Outlet (GO), Replay Acquisition Corp. (RPLA), and Sony Corp.: These very small (less than 0.5% of the portfolio each) positions were kept steady during the quarter.

The spreadsheet below highlights changes to Loeb’s 13F stock holdings in Q3 2019:

Disclosure: I am/we are long ABBV. 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.

Source link

2019-11-27