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.

Third Point's Q1 Letter: Thesis on Honeywell, UniCredit, E.On

Dan Loeb's hedge fund firm Third Point returned 5.9% in the first quarter of 2017.  Their Q1 letter to investors was just released and outlines their thesis on stocks such as Honeywell (HON), UniCredit, and E.On.

Honeywell (HON)

Basically, they're looking for the company to spin-off its aerospace division.  They think this "would result in a sustained increase in shareholder value in excess of $20 billion.  Spinning off Aerospace would transform Honeywell into an industrial growth company with a focus on automation and productivity."

UniCredit

Third Point sees the first quarter as a 'turning point' for European financials as they've traded at lower valuations and UniCredit recently raised 13 billion Euros in capital in March.  They write, "We were drawn to UniCredit by its low valuation and the rights issue.  We believe in the medium-term story because of its new CEO, Jean Pierre Mustier."

E.On

"Following a spin-off of its generation assets into Uniper last year, the company has emerged as a regulated grids and renewables business that is currently misunderstood by the market and attractively priced."

To see the full thesis on all of these names, check out the full letter. 

Embedded below is Third Point's first quarter letter:



You can download a .pdf copy here.

You can also view other recent portfolio activity here.

Susan Byrne's Investment Outlook: Likes Kapstone Paper & Media Nusantara

We're posting up notes from the Great Investors' Best Ideas Investment Symposium in Dallas and next up is Susan Byrne of Westwood Holdings.  Westwood serves various institutional clients and manages $15 billion.


Byrne's Investment Outlook

She started by focusing on Westwood's outlook that in the next 1-3 years we'll see slow below potential GDP growth.  She disagrees with Lee Cooperman a little bit. She's more positive on corporate earnings and likes playing high quality names globally.

Byrne thinks we'll see rising but tame inflation and she likes to play companies that have yields higher than the S&P 500.  She said that the "ultimate risk instrument is stocks" so you need some insulation/protection in the form of a dividend.

She likes companies that grow dividends and put up a chart of the likes of Microsoft (MSFT), Exxon Mobil (XOM), Honeywell (HON), Johnson & Johnson (JNJ), General Electric (GE), and Automatic Data Processing (ADP).  She points out that all of these have equity yielding more than their bonds.

Byrne feels the S&P is "somewhat undervalued" by 10-12% and she wants to beat inflation with dividend yields.  She said to look at emerging markets, in particular Indonesia.


Byrne's Stock Picks

And speaking of Indonesia, she had a stock pick from that country via shares of Media Nusantara (PTMEY via ADR), an advertising company there.  She points out that they're growing advertising by 22% a year and you can play it in the domestic market or via ADR.  The company has a 2% dividend and a mid-teens multiple.


Byrne also pitched a domestic small-cap play via Kapstone Paper (KS).  It trades at 5x EV/EBITDA, has a 10% free cash flow yield and the company's price increases for their products are holding.


For the rest of the presentations, head to notes from the Great Investors' Best Ideas conference.