Third Point's Q3 Letter: New Dover Position

Dan Loeb's hedge fund firm Third Point has released its third quarter letter.  Thus far for 2017, they're up 14.5% in their Offshore Fund and up 23% in their Ultra Fund.

While they feel earnings multiples are high by historical standards, they think earnings growth and low interest rates combine to make an environment ripe for higher valuations anyways.

The biggest risk they see currently?  A recession.  However, they feel the risk is low as economic growth rates are high.

Third Point's New Position in Dover (DOV)

During the third quarter, Third Point initiated a brand new position in Dover (DOV), an industrial conglomerate.  They've engaged management and think there's a 3 main areas for value creation: separate the energy segment, address the underearning core industrial portfolio, and optimize capital allocation.

Their letter also gives updates on DowDuPont, Honeywell (HON), as well as their activist position in Nestle.

Embedded below is Third Point's Q3 letter:



You can download a .pdf copy here.

Greenlight Capital Q2 Letter: Long Chemours (CC)

David Einhorn's hedge fund Greenlight Capital is out with its Q2 letter.  They feel that the 'Brexit' won't be a significant economic event by itself.

Turning to specific stocks, Greenlight outlines its thesis on Chemours (CC), a recent spin-off from DuPont (DD). 

They note, "CC should benefit from the continued recovery of TiO2 prices.  Further, EU regulations are driving adoption of CC's next generation refrigerant Opteon, which should increase fluoroproduts profits.  Lastly, management can reduce costs and shutter unprofitable businesses now that the company is independent of DuPont.  We expect the stock to appreciate as investors refocus on the earnings power of the business, which we think will approach $2.00 in 2017.  Our overall average purchase price is $6.58."

The hedge fund also exited numerous longs during the quarter: Macy's (M), American Capital Agency (AGNC), Baxter (BAX), Oil States International (OIS).

They also covered short positions after the Brexit volatility, including: Intuitive Surgical (ISRG), Under Armour (UA), and United Rentals (URI).

At the end of Q2, Greenlight's largest disclosed longs (in alphabetical order) were: AerCap, Apple, CONSOL Energy, General Motors and gold.  Average exposure was 96% long and 69% short.

Greenlight's Q2 letter is embedded below:



H/T ValueWalk


For other recent hedge fund letters, we also posted up Third Point's Q2 letter here.

Third Point's Q1 Letter: Playing Merger Arb & Pro Forma Situations

Dan Loeb's Third Point is out with its first quarter letter.  In it, they talk about how hedge funds have seen a lot of carnage as of late.

Specifically, they see the decimation in merger arbitrage land as an opportunity, writing, "many of these combined businesses should compound in value thanks to the benefit of synergies, modest financial leverage, and strong or improved management teams that have a history of successful capital allocation."

Their letter outlines their thesis on the following plays:

- Dow / DuPont
- ABInBev / SAB Miller / Molson Coors
- Time Warner Cable / Charter Communications
- Chubb / ACE
- Danaher

Embedded below is Third Point's Q1 letter:

Nelson Peltz & Trian Partners' Presentation on DuPont

Nelson Peltz's activist investment firm Trian Partners has been involved with shares of duPont (DD) for a little while now and recently released a presentation entitled "A Referendum on Performance and Accountability"

Embedded below is Trian Partners' presentation "DuPont Can Be Great":



You can download a .pdf copy here.

What We're Reading ~ Analytical Links 11/6/13

Individual investor bullishness hits 6 year high [PragCap]

What to do in this market [Brooklyn Investor]

On a consistent and repeatable investment process [Research Puzzle]

Portfolios With Purpose: Stock picking for a cause [WSJ]

The 20 smartest things Jeff Bezos has ever said [Fool]

The bull case on Valeant Pharmaceuticals [Barrons]

Quick glance at Du Pont [Modern Graham]

A look at QEP Resources and Rick's Cabaret [HF Intelligence]

Springleaf Holdings and the re-emergence of subprime consumer lending [CFA]

Take-Two: A compelling value with 2 asymmetric options [First Adopter]

Disney and Dish wrangle not over broadcast fees, but the future of TV [NYTimes]

Can companies maintain their extraordinarily high margins? [WSJ]

Whitney Tilson's observations from his trip to China [Seeking Alpha]

On China's pollution problem [NYTimes]

Ajit Jain feeds Buffett's hunger [Insider Quarterly]

Why Twitter's IPO is a bigger deal than Facebook's [WSJ]

For new MBA's, tech more appealing than Wall Street [WSJ]

Trian Partners Sells Danone & State Street, Trims Family Dollar & Ingersoll Rand Stakes: Q2 Letter

Nelson Peltz's investment firm Trian Partners recently released its second quarter letter.  In it, they detail that they sold out of their investment in Danone (DANOY) as well as State Street (STT).  Additionally, the firm mentions that it has recently trimmed its positions in Ingersoll Rand (IR) and Family Dollar (FDO).


New Mystery Investment

Peltz has built a new mystery position which he did not reveal in the letter.  He said that some of the above stakes were sold in order to partially fund their new mystery purchase.

Here's all they had to say about this new position:  It's "a company comprised of world class businesses where we see a path to superior value creation."

Andrew Ross Sorkin said that sources are pointing to Peltz acquiring a stake in DuPont (DD) back at the Delivering Alpha Conference last month, but Peltz didn't really confirm it when asked about it.

At any rate, here's their long portfolio composition by sector: 30% consumer staples, 28.1% consumer discretionary, 17.6% industrials, 13.9% financials, 10.4% basic materials, 0% other.


Other Highlights

Their Q2 letter also touches on their investments in PepsiCo (PEP) and Mondelez (MDLZ) and basically re-hash everything they laid out in their white paper on the companies which we highlighted recently.  Peltz also talked about his PEP & MDLZ stakes at the Delivering Alpha Conference too.

According to the letter, Trian also retains its positions in Lazard (LAZ), Legg Mason (LM), and Wendy's (WEN).  Their thesis on Legg Mason remains unchanged: "Better fund flows, strong free cash flow, and improving margins should allow the shares to be valued closer to peer averages."

In the second quarter, Trian's total firm assets hit an all-time peak of approximately $6.3 billion.  Net exposure finished the month at 100% net long (136.4% long and -36.4% short).

Nelson Peltz on PepsiCo, Mondelez & DuPont: Delivering Alpha Conference

Trian Partners' Nelson Peltz sat down at the Delivering Alpha Conference today and talked about PepsiCo (PEP), Mondelez (MDLZ) and Andrew Ross Sorkin revealed that Peltz has been building a position in DuPont (DD).

Back in April, we highlighted how Peltz took stakes in both PEP & MDLZ.  At the event today, he laid out two scenarios for PEP which he thinks the company should pursue:


On PepsiCo and Mondelez

1. PEP should buy Mondelez (MDLZ) for $35-38 per share.  MDLZ is part of the split from the old Kraft that broke up into Mondelez and Kraft Foods (KRFT).  MDLZ is seen as the fast growing snacks business (Cadbury etc).

The problem with MDLZ he says is operational.  He loves that the CEO made important strategic moves (splitting up the old Kraft entity), but notes that management really needs to boost margins to catch up with direct competitors.


2. Separate Pepsi's beverage side from its snacks business (FritoLay).  Peltz says that these businesses have dis-synergies and they would benefit from a split.  He says Pepsi's beverage side can go to a cashflow generating company run with appropriate leverage.

Then, Peltz noted that the FritoLay snacks business can flourish on its own and even possibly pursue an acquisition of MDLZ after a potential PEP break up since they're both in the snacks business.

Peltz did acknowledge the secular trend of consumers focusing more on healthy items.  He thinks this is more-so focused on sugary drinks, but does note that sweet/salty snacks could be vulnerable as well.


Peltz's New Stake in DuPont?

Andrew Ross Sorkin also said that sources are pointing to Peltz acquiring a stake in DuPont (DD).  Peltz wouldn't really add any color when asked about it (pun intended).

Embedded below is video of Peltz's interview:



For more on this investor, we've highlighted some of Peltz's trading activity here.


And for more summary of the Delivering Alpha Conference, head to:

- John Paulson on gold, real estate & merger arbitrage

- Best Ideas Panel with Mark Kingdon, Chris Hohn, Jim Chanos & Lee Cooperman

- Larry Robbins on healthcare

- Carl Icahn on activism