Dan Loeb's Third Point Likes Citigroup & Transdigm Group: 13F Filing ~ market folly

Monday, February 22, 2010

Dan Loeb's Third Point Likes Citigroup & Transdigm Group: 13F Filing

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is Dan Loeb's Third Point LLC. Third Point manages a series of hedge funds and focus on event driven and value oriented investments. Loeb started his hedge fund with $3.3 million in 1995 and today manages billions. To learn how to invest like a prominent hedge fund manager, check out Dan Loeb's recommended reading list. Additionally, we recommend watching a video of Dan Loeb giving some general investing advice.

Since inception, they've seen greater than 15% annual returns. For 2009, Third Point's Offshore fund was up 38.6% and their Ultra fund up 44.2% as noted in our list of hedge fund performance numbers. The positions listed below were their long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.

Brand New Positions
Citigroup (C)
CIT Group (CIT) ~ most likely a result of debt to equity conversion
Affiliated Comp (ACS)
Mead Johnson Nutrition (MJN)
Xerox (XRX)
Energy Partners (EPL) ~ likely a result of senior notes converting into equity
DirecTV (DTV) ~ a result of the Liberty Media merger
Yahoo (YHOO)
Liberty Media (LSTZA) ~ also a result of the Liberty Media merger
Advanced Micro Devices (AMD)
Pain Therapeutics (PTIE)
Life Partners (LPHI)
TCW Strategic (TSI)

Increased Positions
Coinstar (CSTR): Increased by 183.3%
Transdigm (TDG): Increased by 80%
Wellpoint (WLP): Increased by 37.5%
Capitalsource (CSE): Increased by 14.6%

Reduced Positions
American Water Works (AWK): Reduced by 75%
Greenlight Capital Re (GLRE): Reduced by 54%
Hewlett Packard (HPQ): Reduced by 50%
Popular (BPOP): Reduced by 43.7%

Removed Positions (Sold out completely):
Wyeth (inactive) ~ merger transaction complete
CF Industries (CF)
Liberty Acquisition (LIA)
Bank of America (BAC)
Molson Coors (TAP)
Pfizer (PFE)
Allergan (AGN)
Schering Plough (inactive) ~ merger transaction complete
Apple (AAPL)
Trian Acquisition (inactive)
Liberty Media (LSTZA)
Carefusion (CFN)
Anadrako Petroleum (APC)
First American (FAF)
Lions Gate (LGF)
Synaptics (SYNA)
Oracle (ORCL)
Resolute Energy (REN)
Alkermes (ALKS)
Blockbuster (BBI)
Stream Global (OOO)
Blockbuster b shares (BBI.B)
Loral Space (LORL)

Top 15 Holdings by percentage of assets reported on 13F filing

  1. Transdigm Group (TDG): 9.1%
  2. Citigroup (C): 8.9%
  3. PHH (PHH): 8.4%
  4. Healthnet (HNT): 7.5%
  5. Wellpoint (WLP): 6.9%
  6. CIT Group (CIT): 5.2%
  7. Affiliated Comp (ACS): 5.1%
  8. Mead Johnson Nutrition (MJN): 4.7%
  9. Cablevision (CVC): 4.1%
  10. Xerox (XRX): 3.6%
  11. Nabi Biopharmaceuticals (NABI): 3.6%
  12. Energy Partners (EPL): 3%
  13. Coinstar (CSTR): 2.5%
  14. DirecTV (DTV): 2.5%
  15. Depomed (DEPO): 2.4%

Third Point initiated quite a few brand new positions in the fourth quarter, but keep in mind that some of them are a result of coporate transactions. After all, Third Point focuses on event-driven strategies and often holds positions in numerous asset classes. Their CIT stake is most likely a result of a debt to equity conversion, while their positions in DTV and LSTZA are from the recent Liberty Media merger. Additionally, we detailed Third Point's new EPL position that was most likely a result of senior notes converting into equity.

Their Citigroup (C) stake is brand new and they brought it all the way up to their 2nd largest US equity long. Additionally, their brand new position in baby formula producer Mead Johnson (MJN) intrigued us because we're seeing more and more prominent hedge funds add MJN.

On the selling side, they dumped CF (previously their 3rd largest US equity holding), Bank of America which was previously their fifth largest, and Popular which was their sixth largest. Interestingly they only held their Popular (BPOP) stake for one quarter.

It was also interesting to see Loeb sell over half of his Greenlight Capital Re (GLRE) stake. This has always been a very small position for them, but they've held it for quite a long time so it was curious to see them all of a sudden adjust it. GLRE of course is the casualty and property reinsurer chaired by David Einhorn of hedge fund Greenlight Capital.
A major thing to keep in mind with Third Point is that the equities above are only one small portion of their portfolio. As we've learned in some of their past investor letters, Third Point has been active in distressed debt and other markets and those positions do not show up on 13F's. Assets reported on the 13F filing were $1 billion this quarter compared to $1.2 billion last quarter. Remember that these filings are not representative of the hedge fund's entire base of AUM.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, and Lee Ainslie's Maverick Capital. Check back daily for our new updates.

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