This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.
Next up in our series is Dan Loeb's event driven and value oriented hedge fund, Third Point LLC. Loeb started the firm in 1995 with $3.3 million in seed capital. Today, Third Point manages billions of dollars. Third Point has seen annual returns greater than 15% since inception all with a Sharpe Ratio of 0.9 and a correlation to the S&P 500 of 0.4. As of the end of June 2009, Third Point was up 7.2% for the year. Some of the changes to their portfolio below we have already covered when we wrote about Third Point's latest investor letter. In the letter, we learned that Loeb liked selective debt plays in the automotive sector. And, in the distressed arena in general, Loeb sees a lot of opportunities and feels like "a kid in a candy store." Third Point is a great fund to track for their insight and deep analytical research. To further your understanding about finance, markets, and investing, Dan Loeb has a great list of recommended books. For more on Loeb and Third Point, we'd highly recommend watching this video of a recent speech he gave. In his talk, Loeb details his background and walks us through how Third Point has handled the crisis.
The following were Third Point's long equity, note, and options holdings as of June 30th, 2009 as filed with the SEC. The last time we covered their portfolio, we saw that they liked 'blank check' acquisition type companies, so let's see what they like this time around. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.
Some New Positions (Brand new positions that they initiated in the last quarter):
Bank of America (BAC), CF Industries (CF), Yahoo (YHOO), Sun Micro (JAVA), Allergan (AGN), Molson Coors (TAP), Hewlett Packard (HPQ), Apple (AAPL), Liberty Media (LMDIA), Lions Gate (LGF), Transatlantic Holdings (TRH), Anadarko Petroleum (APC), Qwest (Q), American International Group Preferred (AIG-PA), PepsiAmericas (PAS), Oracle (ORCL), and Pepsi Bottling Group (PBG).
Some Increased Positions (A few positions they already owned but added shares to)
Legg Mason (LMI): Increased posiiton by 1,380% (However, even with the big boost, the position is only 1% of their portfolio now)
Wyeth (WYE): Increased position by 17.8%
Some Reduced Positions (Some positions they sold some shares of)
Guaranty Financial (GFG): Reduced by 46%
Maguire Properties (MPG): Reduced by 17% (This figure is already out of date as we've already covered their recent additional sales of MPG).
PHH Corp (PHH): Reduced by 8.4%
Removed Positions (Positions they sold out of completely)
Victory Acquisition (VRY), Triplecrown Acquisition (TCW), Sapphire Industrials (FYR), Global Brands (GQN), Core Mark (CORE), Global Consumer (GMC), Amedisys (AMED), Hicks Acquisition (TOH), SPDR Gold Trust (GLD), Life Partners (LPHI), Lifetime Fitness (LTM)
Top 15 Holdings by percentage of long portfolio *(see note below regarding specifics)
- Wyeth (WYE): 15.86% of portfolio
- Bank of America (BAC): 9.74% of portfolio
- PHH Corp (PHH): 9.04% of portfolio
- CF Industries (CF): 7% of portfolio
- Liberty Acquisition Holdings (LIA): 6.95% of portfolio
- Yahoo (YHOO): 5.2% of portfolio
- Sun Microsystems (JAVA): 4.35% of portfolio
- Trian Acquisition (TUX): 2.92% of portfolio
- Pfizer (PFE): 2.72% of portfolio
- Allergan (AGN): 2.64% of portfolio
- Molson Coors (TAP): 2.58% of portfolio
- Hewlett Packard (HPQ): 2.57% of portfolio
- Schering Plough 6% (SGP-B): 2.51% of portfolio
- Depomed (DEPO): 2.45% of portfolio
- Apple (AAPL): 2.37% of portfolio
More than anything, Third Point was out making purchases as they bought new positions in Bank of America (BAC), CF Industries (CF), Yahoo (YHOO), and Sun Microsystems (JAVA) and brought them all up to top 10 positions in their long US equity portfolio. They also boosted their pre-existing Wyeth (WYE) stake by over 17%. Keep in mind that with WYE they are playing the risk arbitrage here and they put on the trade at an over 20% spread. His entrance into CF Industries intrigued us as well, as we have previously seen numerous hedge funds involved in various agricultural plays.
Loeb also has jumped in the Bank of America (BAC) play with a brand new position just like fellow hedge fund manager John Paulson did as well. In fact, a large amount of hedge funds we cover entered the BAC trade but we'll have more on that in the coming days. Loeb already told us about the BAC play in his latest investor letter. In it, he tells us that he built up a position in preferred shares at 57 cents on the dollar and then swapped them for common stock worth $10 a share. He says they have continued to build their BAC position as they see normalized earnings power of ~$3/share.
When we last covered their portfolio, we noticed their propensity to invest in 'blank check' shell acquisition type companies. This time around, they've sold out of a lot of them but still hold Liberty Acquisition and Trian Acquisition.
That about wraps up Loeb's portfolio. Make sure you definitely check out Dan Loeb's recommended investing books, as these picks come straight from the hedge fund manager himself. Again, we also want to reiterate that tracking managers through 13F's is great and all, but you really need to examine every resource you can. While Loeb's 13F reveals his equity plays, you have to turn to his investor letter to hear about their plays in automotive industry debt and distressed mortgages, not to mention their foreign holdings.
*Note regarding portfolio percentages: Assets from the collective holdings reported to the SEC via 13F filing were $901 million this quarter compared to $516 million last quarter, so definitely a sizable increase in assets invested long in US equities. Please keep in mind that when we state "% of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. Third Point manages billions of dollars and the percentages are in reality more watered down in their actual hedge fund portfolio. For instance, the positions above were divided by the $901 million reported in the 13F. If you were to calculate percentage weightings in the actual hedge fund portfolio, they would obviously be different since you would divide position sizes by their total assets under management (in the billions).
This is just one of the 40+ prominent funds that we'll be covering in our Q2 2009 hedge fund portfolio series. So far, we've already covered the holdings of Bill Ackman's Pershing Square Capital Management, David Einhorn's Greenlight Capital, and Seth Klarman's Baupost Group. Check back each day as we cover prominent hedge fund portfolios.