Dan Loeb Discloses Anadarko Petroleum (APC) Position: Third Point Portfolio Update ~ market folly

Wednesday, August 4, 2010

Dan Loeb Discloses Anadarko Petroleum (APC) Position: Third Point Portfolio Update

Dan Loeb's hedge fund firm Third Point LLC is out with its July Offshore fund portfolio disclosure. For the month of July, the fund was up 3.2%. Year to date for 2010, the fund is up 13.7%. Third Point currently has an impressive 17.9% annualized return with a Sharpe Ratio of 1.25 and a correlation to the S&P 500 of 0.40. To learn to become a successful investor like this hedge fund manager, we'd obviously point you to Dan Loeb's recommended reading list.

In their latest portfolio breakdown, we see some changes worth highlighting. Here's a look at Third Point's top five positions:

1. Chrysler (multiple securities)
2. Delphi Corp (multiple securities)
3. CIT Group (multiple securities)
4. Dana Holding Corp (multiple securities)

5. Anadarko Petroleum (APC)

Keep in mind that 'multiple securities' simply means that they own numerous positions across the capital structure in that specific company and this list takes into account their collective position. Right away there are two major portfolio changes to notify you about. Firstly, Dan Loeb has started a brand new position in Anadarko Petroleum (APC) because it did not appear when we examined Third Point's Q1 portfolio. They've started this position presumably as shares have tumbled due to APC's partial operating stake in the deepwater rig responsible for the oil spill in the Gulf of Mexico. While BP (BP) has taken the majority of the blame for the spill, Anadarko owned a 25% interest and thus bears some liability.

This means that Loeb has joined the ranks of other prominent investors who have identified opportunity as a result of the Gulf oil spill. Just yesterday we highlighted Grey Owl Capital's purchase of Transocean (RIG). Prior to that, Whitney Tilson's T2 Partners bought BP (BP) as they feel the company will have no problem surviving. And although this next company was not directly involved in the spill, David Einhorn's Greenlight Capital purchased Ensco (ESV) as a result of the sector trading down.

The second portfolio change to highlight is in Third Point's PHH Corp (PHH) position. In previous portfolio disclosures, Loeb's hedge fund has listed PHH as one of their top 5 holdings (they owned multiple PHH securities). This time around, however, PHH is not listed in their top 5 positions. This leaves a few scenarios in play: Third Point could have sold part or all of their stake in PHH, or they could have raised their stake in other positions ahead of PHH (for instance their new stake in Anadarko). There's no way to know which scenario is the case and this could only be a minor change, but we'll have to wait to verify. PHH shares traded up 11% yesterday as the company reiterated its full year earnings outlook. In terms of other recent portfolio activity, we've highlighted Third Point's stake in Emmis Communications (EMMSP).

Let's next move to the top winners in their portfolio for July. These included their longs of Delphi (multiple securities), Atlas Pipeline (APL), Chrysler (multiple securities), Lyondell (LALLF), and an undisclosed short position. Of these stakes, you'll recall that Jamie Dinan of York Capital is bullish on Lyondell as well. Third Point's top losing positions for the month consisted of Gala Casino (multiple securities), SemCrude LP (multiple securities), Peregrine Metals (multiple securities) and two undisclosed short positions.

Next, let's focus on their latest exposure levels. In equities, Third Point is long 43.8%, short -12.1%, leaving them net long to the tune of 31.7%. Their largest sector net longs are in Consumer at 8%, Financials at 8%, and Basic Materials at 6%. In credit, Third Point is 50.6% net long with their largest exposure coming from MBS at 19.1%. Their distressed exposure comes in at 16.4% and their Performing exposure at 15.1%. Third Point has significantly reduced their distressed exposure as they were previously 25.1% net long and now are only 16.4% net long. Lastly, in terms of geographic exposure, Dan Loeb's hedge fund is net long the Americas at 84%, net long Europe at 13% and net short Asia at -1%.

Be sure to check out hedge fund manager Dan Loeb's recommended reading list, as well as Third Point's recent portfolio activity.

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