Dan Loeb's Third Point Outperforming, Reduces Exposure Yet Again ~ market folly

Friday, September 2, 2011

Dan Loeb's Third Point Outperforming, Reduces Exposure Yet Again

In early August, we noted how Dan Loeb's Third Point reduced equity exposure for the third consecutive month. That decision has certainly paid off as Loeb's fund was only down 2.8% in August compared to the S&P 500 which was down 5.4%. Year-to-date as of the end of August, Third Point is up 3.9% while the S&P is down 1.8%.

Reduced Exposure for Fourth Straight Month

At the end of August, Third Point was only 17.7% net long equities, down even further from their 23.3% net long exposure back in July. Their largest net long exposure comes in technology at 6.5% and basic materials at 3.5%. Third Point is net short industrials (-1.5%) and utilities (-0.6%).

In credit, Loeb's Offshore Fund is 18.5% net long, a slight decrease from last month. They continue to be net short government securities (-10.3%) and have their largest net long exposure in asset backed securities (+17.3%).

Geographically, Third Point is net long the Americas at 50%, net short EMEA at -4% and net short Asia at -2%.

Third Point's Outperformance

So while decreased exposure to risk certainly has helped Loeb outperform in this volatile market, his winners the past month include gold, short A, CVR Energy (CVI), Barrick Gold (ABX), and short B.

It should come as no surprise that their gold related investments have helped them outperform as the precious metal rocketed higher as market volatility increased. Not to mention, gold has been one of Third Point's largest positions for some time now.

Top Positions

- gold
- Delphi
- CIT Group (multiple securities held)
- Technicolor (multiple securities held)
- El Paso (EP)

The most notable change in Third Point's top positions since last month is the absence of Mosaic (MOS). There's no way to know exactly why because they could have reduced their position size, other positions could have appreciated more, or they could have bought more of some of their top holdings.

Third Point originally bought MOS on the secondary when the Cargill family unloaded shares at $65 per share. The hedge fund subsequently 'bought the dip' in MOS when it traded down to around $60. During August, MOS traded as low as $55.70, and currently trades around $69.50.

Either way, Third Point's top holdings have largely been what you see above as they wait for Delphi to go public and El Paso to split up.

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