Friday, April 28, 2017

Third Point's Q1 Letter: Thesis on Honeywell, UniCredit, E.On

Dan Loeb's hedge fund firm Third Point returned 5.9% in the first quarter of 2017.  Their Q1 letter to investors was just released and outlines their thesis on stocks such as Honeywell (HON), UniCredit, and E.On.

Honeywell (HON)

Basically, they're looking for the company to spin-off its aerospace division.  They think this "would result in a sustained increase in shareholder value in excess of $20 billion.  Spinning off Aerospace would transform Honeywell into an industrial growth company with a focus on automation and productivity."


Third Point sees the first quarter as a 'turning point' for European financials as they've traded at lower valuations and UniCredit recently raised 13 billion Euros in capital in March.  They write, "We were drawn to UniCredit by its low valuation and the rights issue.  We believe in the medium-term story because of its new CEO, Jean Pierre Mustier."


"Following a spin-off of its generation assets into Uniper last year, the company has emerged as a regulated grids and renewables business that is currently misunderstood by the market and attractively priced."

To see the full thesis on all of these names, check out the full letter. 

Embedded below is Third Point's first quarter letter:

You can download a .pdf copy here.

You can also view other recent portfolio activity here.

ValueAct Capital Takes KKR Stake

Jeff Ubben's activist firm ValueAct Capital has taken around a $750 million stake in private equity firm KKR (KKR).  Partner Mason Morfit talked about the position at 13D Monitor's Active-Passive Investor Summit in New York, according to Business Insider.

This is yet another prominent firm that has jumped on the private equity train.  We've highlighted recently how Tiger Global has been building a position in Apollo Global Management.

At the presentation, Morfit called KKR a "50 cent dollar" and thinks that big firms will get even larger.

ValueAct recently returned a chunk of capital to investors as they were having trouble finding ideas in a market with stretched valuations.  But apparently they've at least found one place to park some capital in KKR.

You can view other recent portfolio activity from ValueAct here.

Per Google Finance, KKR is "a global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit and hedge funds. The Company's business offers a range of investment management services to its fund investors, and provides capital markets services to its firm, its portfolio companies and third parties. The Company conducts its business with offices across the world, providing it with a global platform for sourcing transactions, raising capital and carrying out capital markets activities. The Company operates through four segments: Private Markets, Public Markets, Capital Markets and Principal Activities. It operates and reports its combined credit and hedge funds businesses through the Public Markets segment. The Capital Markets segment consists primarily of its global capital markets business. Through its Principal Activities segment, the Company manages the firm's assets and deploys capital."

Hedge Fund Links ~ 4/28/17

The hedge fund manager that's shorting America's malls [WSJ]

Hedge funds prize open Japan [Bloomberg]

Coatue invests in Domino Data Lab [ZDnet]

On the value of doing site visits in fund manager selection [Research Puzzle]

An activist investment in Whole Foods exposes shifting power on Wall Street [NYTimes]