Third Point LLC, an investment management firm founded in 1995 by billionaire Daniel S. Loeb, primarily focuses on event-driven, value-oriented investing. Mr. Loeb, who currently serves as the asset manager’s Chief Executive Officer, has three decades of experience in financial markets, particularly in special situation equities, distressed debt and risk arbitrage. In a recently-released quarterly letter to investors, the New York-based asset manager said the “Battle of the Bastards” scene in the TV series “Game of Thrones” showed how it felt to manage money over the past year.
“Surging enemies forming a seemingly impossible perimeter, a crush of fellow soldiers on the field, arrows coming in overhead, and the need to avoid panic and deftly use sword and shield to fight your way out of a seemingly impossible situation is a good analogy for the emotional experience of managing assets since last summer”, said Third Point LLC in its freshly-released letter to investors.
Nonetheless, the multi-billion-dollar investment firm managed to beat the S&P 500 gauge in the second quarter of 2016, returning 4.6% during the quarter versus the 2.5% return delivered by the S&P 500 Index. Third Point LLC’s return for the first half of the year was 2.2%, below the 3.8% return generated by the S&P 500 benchmark. The investment firm has its capital in a “well-diversified portfolio of US-centric credit and equities”. That said, the following article will lay out Third Point’s thoughts on its largest equity investment, as well as will discuss four other top holdings, based on its latest 13F filing.
At Insider Monkey, we track around 770 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).
#1. Baxter International Inc. (NYSE:BAX)
– Shares owned by Third Point LLC as of March 31: 53.85 Million
– Value of Third Point LLC’s holding as of March 31: $2.21 Billion
Baxter International Inc. (NYSE:BAX) was the largest equity holding in Third Point LLC’s portfolio at the end of the March quarter, accounting for 20.4% of the entire value of that portfolio. The position was worth $2.21 billion on March 31. The activist firm’s investment in the global manufacturer and supplier of health care products has generated a nearly 20% internal rate of return (IRR) since its inception last June, partially driven by the investment firm’s active involvement in Baxter immediately following the divestiture of its biopharmaceuticals business, Baxalta, in early July. “Despite this meaningful move in performance, its current size is consistent with our conviction about the company and its leadership and the potential we see for meaningful upside from these levels”, said Third Point LLC in its investor letter. Dan Loeb and his team are encouraged by the results of CEO Joe Almeida’s execution of his freshly-outlined strategic plan that focuses on portfolio optimization, enhanced operational excellence, and disciplined capital allocation. Mr. Almeida took the helms of the company in early 2016. Baxter shares are 26% in the green year-to-date. Ken Griffin’s Citadel Advisors LLC was the owner of 5.22 million shares of Baxter International Inc. (NYSE:BAX) at the end of March.
