Third Point's Q2 Letter: Allergan, Suzuki Motor, Constellation Brands, Mohawk, Roper ~ market folly

Monday, August 3, 2015

Third Point's Q2 Letter: Allergan, Suzuki Motor, Constellation Brands, Mohawk, Roper

Dan Loeb's hedge fund firm Third Point is out with its second quarter letter.  The hedge fund has generated annualized returns of 20.5% over the last two decades.

Third Point's Q2 letter outlines their thesis on 5 stocks.  Here's the brief summary with the full letter below.

Allergan (AGN):  Formerly Actavis, this company recently sold its generics business for ~17x EBITDA and Third Point thinks the company is poised to grow as a pure-play pharma company.  Branded assets + unlevered balance sheet + valuation below comparables = opportunity.

Suzuki Motor: This could be largely viewed as a play on India to capitalize on a growing middle class given the company's stake in Maruti as more people purchase cars. Overhang on shares due to litigation with Volkswagen.

Constellation Brands (STZ):  The next three stocks Third Point has labeled as 'compounders,' or companies that have good management and generate a lot of cash flow that's then allocated wisely to drive returns.  They see margin improvement and solid volume trends for this alcoholic beverage company and also think capital return to shareholders will ramp up further once capex comes down.

Mohawk (MHK):  This global flooring company is at the beginning of a cyclical recovery and seeing margin improvement.  They also see a lot of potential acquisition targets for the company.

Roper (ROP):  This company has generated 18% annualized shareholder returns over the last 10 years.  ROP runs a decentralized strategies and acquires a lot of companies.  They like the company's organic revenue growth and think it'll see a 15% CAGR going forward.

Embedded below is Third Point's Q2 letter:

You can view additional portfolio activity from Third Point here.

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