Third Point's Q1 Letter: New Stakes in Yum Brands, Devon Energy ~ market folly

Friday, May 1, 2015

Third Point's Q1 Letter: New Stakes in Yum Brands, Devon Energy

Dan Loeb is out with Third Point's first quarter letter.  In it, he details how he's "constructive on the US" mainly for 3 reasons: economic data improving, the Fed not raising rates in June, and when they do raise, the expectation is they'll do it gradually. 

New Stake in Yum! Brands

Third Point also reveals two new equity longs.  They've built a stake in Yum Brands (YUM) which includes KFC, Taco Bell and Pizza Hut restaurants.  They see the company turning around its troubles in China with KFC and note Pizza Hut needs to improve to battle competitors on margin. 

Third Point writes, "We think investors should want to own Yum! for its unique open-ended middle-class growth story in China and its strong and growing franchise-led cash flows outside China."

New Position in Devon Energy

Also, the hedge fund revealed a new position in DVN.  They like certain steps the company has taken such as exiting certain businesses, entering joint ventures, and sale of non-core assets.  However, they want the company to continue to streamline its portfolio "to focus on top-tier US assets in the Permian Basin, Eagleford, and Cana-Woodford."

Lastly, it's also worth noting that Third Point now has 10% of its assets invested in Japan.  They also update their positions in Fanuc and IHI.

Embedded below is Third Point's Q1 letter:

For more from this hedge fund, head to Third Point's Q4 letter which outlines their thesis on Fanuc.

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