Dan Loeb's Third Point LLC Fancies 'Blank Check' Companies: 13F Filing Q1 2009 ~ market folly

Thursday, July 9, 2009

Dan Loeb's Third Point LLC Fancies 'Blank Check' Companies: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up is Dan Loeb's Third Point LLC, a $2 billion hedge fund firm. Specifically, they deem themselves to be "event driven, value oriented investors." Loeb founded the firm back in 1995 with $3.3 million in seed capital and is still running the show these days. While Third Point is technically an activist fund, Loeb often has numerous passive investments as well. Loeb himself is quite well known for his searing and critical letters to management of various companies. Third Point has seen annual returns averaging over 15% since inception (including the crazy year that was 2008), a Sharpe Ratio of 0.9, and a correlation to the S&P500 of 0.4. As per their April investor update, we saw that they were net long healthcare and utilities, while being heavily net short consumer at that time.

Their Offshore fund was up 7.4% for the month of May 2009. We covered Third Point's performance and more in our May hedge fund performance numbers post. Additionally, you can see some of Third Point's market commentary in their Q1 2009 investor letter. For the month of June 2009, Third Point was up 1.8%, bringing their year to date total to up 7.2%.

In terms of more recent activity, we revealed that Third Point filed an amended 13D on Maguire Properties (MPG). The following were their long equity, note, and options holdings as of March 31st, 2009 as filed with the SEC. 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):
Wyeth (WYE), Pfizer (PFE), Schering Plough (SGP-PB) B shares, Amedisys (AMED), Schering Plough (SGP), Life Partners Holdings (LPHI), Legg Mason (LMI).

Some Increased Positions (A few positions they already owned but added shares to)
Nothing of significance

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
SPDR Gold Trust (GLD): Reduced by 94%
Life-Time Fitness (LTM): Reduced by 79%
Core-Mark Holding (CORE): Reduced by 20%

Removed Positions (Positions they sold out of completely)
Wachovia (WB), Exco Resources (XCO), Potash (POT), Teradata (TDC), SPDR S&P500 (SPY), Telephone Data Systems, UST (UST), Rohm & Haas (ROH), Energy XXI (EXXI), Epicor (EPIC), Dineequity (DIN)

Top 15 Holdings (by % of portfolio)

  1. Wyeth (WYE): 22.28% of portfolio
  2. PHH Corp (PHH): 13.29% of portfolio
  3. Liberty Acquisition Holdings (LIA): 11.75% of portfolio
  4. Victory Acquisition Corp (VRY): 5% of portfolio
  5. Trian Acquisition (TUX): 4.95% of portfolio
  6. Nabi Biopharma (NABI): 4.93% of portfolio
  7. Triplecrown Acquisition (TCW): 4.35% of portfolio
  8. Pfizer (PFE): 4.31% of portfolio
  9. Schering Plough (SGP-PB) B shares : 4.1% of portfolio
  10. Sapphire Industrials (FYR): 3.7% of portfolio
  11. Depomed (DEPO): 3.22% of portfolio
  12. Global Brands Acquisition (GQN): 2.4% of portfolio
  13. Greenlight Capital Re (GLRE): 2.22% of portfolio
  14. Core-Mark Holding Company (CORE): 1.9% of portfolio
  15. Global Consumer Acquisition (GHC): 1.8% of portfolio

Third Point was doing more selling than anything. They completely sold out of Wachovia and Exco, which had previously been 8.7% and 8.2% positions for their hedge fund. Additionally, they sold out of numerous prior 5% positions including Potash, Teradata, and the S&P500 index. Not to mention, they sold practically all of their gold position (GLD). We already knew and reported this back in late April, and it is now reflected in their 13F filing. They were merely using GLD as a trade to shelter their portfolio from uncertainty in the markets. (And head here for a recent technical analysis video on gold).

However, Third Point did still manage to make a few purchases, including shares of Wyeth as they brought it all the way up to their top position at 22.28% of the portfolio as a brand new stake. Undoubtedly, they were playing the merger arbitrage/event driven game here, like so many other hedge funds out there. Additionally, they added new modestly sized positions of Pfizer and Schering Plough.

What still catches our eye though is Third Point's propensity to own merger and acquisition 'blank check' shell companies. Eight of their top fifteen positions are all companies whose sole purpose is to create some sort of event through purchase, merger, capital stock exchange, or asset acquisition. It definitely is quite interesting to see them own so many similar companies in this regard.

Assets from the collective holdings reported to the SEC via 13F filing were $516 million this quarter compared to $799 million last quarter, so quite a noticeable drop off in assets invested on the long side of the portfolio. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. We've already covered:

- Gurus such as: Soros Fund Management (George Soros), and Jim Rogers.

- 'Tiger Cub' portfolios like: Andreas Halvorsen's Viking Global, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Shumway Capital Partners (Chris Shumway), Chase Coleman's Tiger Global,

- Outperforming funds like: John Paulson's hedge fund Paulson & Co, Eric Mindich's Eton Park Capital, Raj Rajaratnam's Galleon Group,

- Value and activist funds such as: David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Whitney Tison's T2 Partners, Philip Falcone's Harbinger Capital Partners, Ricky Sandler's Eminence Capital, Bill Ackman's Pershing Square Capital Management,

- Concentrated funds that play secular/macro themes such as: Timothy Barakett's Atticus Capital, Bret Barakett's Tremblant Capital Group, Boone Pickens' BP Capital Management, John Burbank's Passport Capital

- Global macro firms such as: Paul Tudor Jones' Tudor Investment Corp, Louis Bacon's Moore Capital Management, Peter Thiel's Clarium Capital,

- And, newer funds on the scene: David Stemerman's Conatus Capital, Anand Parekh's Alyeska Investment Group. Check back each day as we cover new fund portfolios.

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