Dan Loeb's Hedge Fund Third Point Starts Multiple New Positions, Exits Citigroup: 13F Filing Q1 2010 ~ market folly

Monday, May 24, 2010

Dan Loeb's Hedge Fund Third Point Starts Multiple New Positions, Exits Citigroup: 13F Filing Q1 2010

(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 filings.)

Next up is Dan Loeb's hedge fund Third Point LLC. Loeb started his hedge fund with $3.3 million in 1995 and today manages billions with a focus on event-driven and value oriented investments. In the time elapsed since the 13F filing, keep in mind that Third Point has been selling Nabi Biopharma (NABI) and Loeb recently gave commentary on event-driven opportunities in Third Point's investor letter. 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.

Before we proceed, keep in mind that Loeb owns other asset classes that aren't required in these disclosures such as company debt, mortgage backed securities, etc. We recently detailed Loeb's exposure to these assets in our portfolio update on Third Point. To learn how to invest like this hedge fund manager, check out Dan Loeb's recommended reading.

The positions listed below were Third Point's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:

Brand New Positions
Liberty Interactive (LINTA)
OSI Pharmaceutical (OSIP)
Airgas (AIRG)
Walgreen (WAG)
Coca Cola Enterprise (CCE)
Aspen Technology (AZPN)
Pall (PLL)
Alcon (ACL)
Toyota Motor (TM)
Phillips Van Heusen (PVH)
RF Micro (RFMD)
Lear (LEA)
Brocade Communications (BRCD)
Madison Square Garden (MSG) ~ resulting from the spin-off of Cablevision shares they previously owned
Macys (M)
Alkermes (ALKS)
Washington Post (WPO)
Vivus (VVUS)
Kraft (KFT)
Abraxas Petro (ABP)

Increased Positions
Xerox (XRX): Increased position size by 75%
Advanced Micro Devices (AMD): Increased by 50%
CIT Group (CIT): Increased by 34.3%
Popular (BPOP): Increased by 25%
Wellpoint (WLP): Increased by 18.2%

Reduced Positions
Phoenix Companies (PNX): Reduced position size by 76.3%
Dana Corp (DAN): Reduced by 68.8%
Nabi Biophamaceuticals (NABI): Reduced by 14.2% ~ Third Point has since sold more

Positions They Sold Out of Completely
Citigroup (C)
Cablevision (CVC)
Energy Partners (EPL)
Coinstar (CSTR)
Yahoo (YHOO)
Liberty Entertainment (LSTAV)
Hewlett Packard (HPQ)
Pepsi Bottling Group (PBG) ~ inactive due to merger
Pepsiamericas (PAS) ~ same
Capitalsource (CSE)
Greenlight Capital Re (GLRE)
American Water Works (AWK)
Pain Therapeutics (PTIE)
Life Partners (LPHI)
Barclays (BCS)
TCW Strategic (TSI)

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

1. PHH Corp (PHH): 7.6%
2. Transdigm (TDG): 6.8%

3. CIT Group (CIT): 6.5%

4. Wellpoint (WLP): 6%

5. Health Net (HNT): 5.3%

6. Liberty Interactive (LINTA): 5.2%

7. OSI Pharmaceutical (OSIP): 5.1%

8. Xerox (XRX): 4.9%

9. Airgas (ARG): 4.2%

10. Walgreen (WAG): 4.0%

11. Coca Cola Enterprises (CCE): 4%

12. Mead Johnson Nutrition (MJN): 3.7%

13. Aspen Technology (AZPN): 3.7%

14. Pall (PLL): 2.9%

15. Popular (BPOP): 2.6%

Before we analyze some of their moves we need to immediately point out that the 'top positions' above are merely their top equity positions and not Third Point's 'top positions' at the hedge fund overall. According to our Third Point portfolio breakdown, Loeb's largest positions are actually via multiple securities (debt, equity, etc) in Chrysler, Delphi, CIT Group, Dana Holding, and PHH. So, just keep in mind that some of his debt positions are actually the largest positions in Third Point's portfolio.

One of the main things that caught our eye was Loeb's sale of Capitalsource (CSE). Third Point had previously held a position and now joins a slew of other hedgies that sold out of CSE in the first quarter. Interestingly enough, Seth Klarman's Baupost Group still holds their CSE equity stake though. We also highlight Loeb's exit from Citigroup (C) because in the fourth quarter of 2009 it was their second largest US equity position.

In the first quarter, Loeb's hedge fund started sizable new stakes in Liberty Interactive and OSI Pharm, positions that were Third Point's sixth and seventh largest US equity holdings. In fact, the vast majority of Third Point's top equity holdings are new positions they started in Q1 including Airgas, Walgreen, Coca Cola Enterprise, Aspen Technology, and Pall.

Third Point's exit of PepsiAmericas and Pepsi Bottling Group is a result of a merger transaction with PepsiCo that closed. This is the perfect example of an event-driven play that Loeb typically seeks. We see that Third Point maintains a sizable position in Mead Johnson Nutrition (MJN) as well. We previously outlined Loeb's rationale behind MJN in a post: why hedge funds like Mead Johnson Nutrition. We're also starting to see numerous hedge funds that show new or increased positions in Xerox (XRX) as of the first quarter. Loeb's firm was one of them and so that might be something to keep an eye on as well.

David Einhorn must be pissed because Loeb sold out off Greenlight Capital Re, the reinsurance company Einhorn is chairman of. We're just kidding about the being pissed off part, but Third Point had previously owned GLRE for quite some time (although a very small position). On a serious note though, it seems as though Loeb and Einhorn agree on shares of CIT Group. As we saw earlier, Einhorn added to his CIT position. That about wraps up all the talking points from the first quarter so if you want more from Dan Loeb, make sure to check out his recommended reading list.

Assets reported on the 13F filing were $1.4 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, and Andreas Halvorsen's Viking Global. Be sure to check back daily for new hedge fund updates.

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