Dan Loeb Concerned About Consensus Bullish View: Third Point's Year-End Letter ~ market folly

Wednesday, February 9, 2011

Dan Loeb Concerned About Consensus Bullish View: Third Point's Year-End Letter

Dan Loeb's hedge fund Third Point is out with its 2010 year-end letter to investors and the most notable aspect of it is that Dan Loeb will no longer be authoring the letter going forward. He is doing so "in order to keep our views proprietary and maximize time spent on investing."

2011 Outlook

Third Point expects a continued global recovery, high commodity prices, and an increase in mergers and acquisitions activity (M&A). However, Loeb is cautious about one thing, writing, "Our greatest concern is the growing consensus around the bullish view we have held since April 2009. Therefore, we welcome sharp corrections like the two we had last month."

Focus on Paper Companies

We've highlighted how Third Point likes post-reorganization equities. While they own chemical company Lyondell Basel (LYB), the hedge fund also has exposure to various paper industry plays. Third Point's letter reveals that they initiated a new position in NewPage in the fourth quarter ("a performing credit under distressed pressure").

Loeb also reveals that he owns a position in Bowater, otherwise known as AbitibiBowater (ABH), a company that just emerged from bankruptcy and will soon also be classified as a post-reorganization equity.

Third Point also details their position in Smurfit-Stone Container (SSCC) and we've highlighted how hedge funds are active in SSCC and oppose the proposed takeover. Further rationale behind Third Point's interest in the paper industry is outlined in their 2010 year-end letter to investors, embedded below:

You can download a .pdf copy here.

For more on Loeb's hedge fund, we also just detailed Third Point's latest positioning & exposure levels.

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