Famous billionaire activist hedge-fund manager Dan Loeb of Third Point is renowned for the bombshells that he drops on the management of his target companies in the form of letters attacking their CEOs for their professional and/or personal failings. His letter to Sothebys (NYSE:BID) highlighting CEO William F. Ruprecht’s lack of strategic vision and extravagance, costing the shareholders of the company dearly, is just one such example. Loeb’s firm recently filed its Form 13F with the SEC for the reporting period of March 31, and while it contains no such bombshells, it does disclose the investor’s latest moves.
Currently, Third Point has nearly $22.5 billion in assets under management with the market value of its equity portfolio standing at $10.82 billion at the end of March. His top picks remained the same as at the end of the fourth quarter, except for the exclusion of Alibaba Group Holding Ltd (NYSE:BABA), which Loeb sold off completely during the first quarter. The new-look portfolio is headed by Amgen, Inc. (NASDAQ:AMGN), Actavis plc (NYSE:ACT), Dow Chemical Co (NYSE:DOW), and Ally Financial Inc (NYSE:ALLY), with the healthcare sector contributing the most to the portfolio value at 27%.
Third Point is a fund that we have been following for the last couple of years along with over 700 other investment firms and wealthy money managers. We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45 days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012. These stocks returned 139% over the last 2.5 years, outperforming the S&P 500 ETF by nearly 80 percentage points (see more details here). Let’s take a closer look now at the companies Loeb believes are on the right track towards unlocking greater value for their shareholders.
Amgen, Inc. (NASDAQ:AMGN) was Third Point’s largest holding at the end of the first quarter with some 10.0 million shares valued at $1.60 billion. The stake still represented nearly 15% of the fund’s portfolio value despite being trimmed by 6% during the quarter. Amgen, Inc. (NASDAQ:AMGN)’s heart failure drug, Corlanor recently received FDA approval. The $124.4 billion developer of human therapeutics believes that the market for Corlanor could be as large as one million people in the U.S. and that it could potentially surpass its peak sales estimate of $1 billion to $1.5 billion. Amgen, Inc. (NASDAQ:AMGN) has appreciated by more than 45% over the past year. After Third Point, Samuel Isaly‘s healthcare fund Orbimed Advisors is the second-largest shareholder of Amgen, Inc. (NASDAQ:AMGN) within our database, owning 3.05 million shares.
Third Point’s second-largest stock pick, Actavis plc (NYSE:ACT), surpassed all other companies last quarter as it occupied the top spot among the hedge funds’ favorite picks during the quarter. Among over 700 hedge funds that we track, 157 held Actavis plc (NYSE:ACT) in their portfolios, up from 131 at the end of the previous quarter. Third Point’s holding in the $117.12 billion company was comprised of 3.58 million shares valued at $1.06 billion after an increase of 3% over the quarter. Actavis plc (NYSE:ACT)’s latest acquisition of Botox-maker Allergan could potentially pay off even more than the company expected, as a recent finding presented at the American Psychiatric Association’s annual meeting suggests that Botox could possibly alleviate depression. Allergan’s own study related to this is going to be completed next year. Actavis plc (NYSE:ACT) is up by a solid 15.74% year-to-date amid first quarter financial results that beat estimates for both EPS and revenue. With some 6.11 million shares, Andreas Halvorsen‘s Viking Global is the largest shareholder of the company among the firms we track.
Loeb’s Dow Chemical Co (NYSE:DOW) holding remained unchanged during the quarter at 22.0 million shares, valued at $1.06 billion. Third Point has held a position in the $58.49 billion company since the last quarter of 2013 and it ranked as the fund’s top pick throughout the middle of 2014. Last year, Loeb urged the management of the world’s second-largest chemicals maker to split the company’s petrochemicals business from its specialty-chemicals business. As if Dow Chemical Co (NYSE:DOW) didn’t have enough on its hands, whistleblower lawsuits raising questions about CEO Andre Liveris’ improper expenditures have been popping up recently. The company is defending Liveris, asserting that such claims are baseless and have been thoroughly investigated. Regardless of any controversy Dow Chemical Co (NYSE:DOW) has performed well so far this year with the stock appreciating by nearly 12%. Daniel S. Och‘s OZ Management held about 14.48 million shares of Dow Chemical Co (NYSE:DOW) valued at $694.92 million at the end of March.
After a 13% reduction in its stake during the first quarter, Loeb’s Ally Financial Inc (NYSE:ALLY) holding occupied the fourth spot in his equity portfolio, consisting of 26.0 million shares valued at $545.48 million. Third Point initiated a stake in the company during the second quarter of last year. The holding has been cut down in all of the following quarters since. The $10.71 billion automotive financial services company is down by 5.3% year-to-date. Ally Financial Inc (NYSE:ALLY) has been able to effectively diversify its loan and lease originations as evidenced by its latest financial results. Loan originations that weren’t related to either GM or Chrysler rose by 54% to $2.7 billion during the quarter on a year-over-year basis. Stephen Feinberg’s Cerberus Capital Management is the largest stockholder of the company with ownership of 41.52 million shares.
Disclosure: None
