Billionaire Dan Loeb’s Biggest Moves in Q4

Billionaire Dan Loeb founded value-oriented hedge fund Third Point LLC in 1995 with only $3.4 million in capital, and since then, has become one of the most closely-watched hedge fund managers in the world. The billionaire investor has three decades of experience in the industry and has been very successful in generating attractive returns for his clients. In fact, Third Point has generated an annualized return of 16.2% since its inception, through the end of December 2015, compared to the return of 7.3% generated by the S&P 500 Index over the same time span. Nonetheless, the fund was down by 1.4% in 2015, being severely hit during the turbulent third quarter. According to Third Point’s latest letter to investors, the widely-known investment firm significantly reduced its exposure to companies that were “economically sensitive or tied to China or to commodity pricing” and significantly increased its short exposure in the second half of 2015. To be more detailed, the firm said that it had increased its single-name equity shorts fourfold over the past year. Nonetheless, as 13Fs do not disclose hedge funds’ short positions, individual investors should focus on their highest conviction long-term bets instead. The data compiled by Insider Monkey shows that Third Point’s long positions in companies with a market capitalization of more than $1 billion delivered weighted average returns of 1.1% in 2015, based on the size of the positions at the beginning of each quarter of the year. Leaving the fund’s performance aside, the following article will discuss Dan Loeb’s largest and most noteworthy moves made during the fourth quarter of 2015, as revealed in his latest 13F filing.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Let’s kick off our discussion by looking at a new position initiated by Third Point during the fourth quarter. Dan Loeb’s fund acquired a new stake of 1.50 million shares in Chubb Limited (NYSE:ACE), now Chubb Corp (NYSE:CB), which was valued at $175.28 million on December 31. During the summer of 2015, Swiss insurer ACE Limited announced the acquisition of Chubb for $62.93 in cash and 0.6019 shares of ACE stock. The deal was completed in mid-January, after which ACE adopted the Chubb name globally. The freshly-combined company represents the world’s largest publicly-traded property and casualty insurance company. Meanwhile, the recent combination is anticipated to generate annual expense savings of approximately $650 million pre-tax by 2018. The insurance behemoth also expects to spur meaningful growth in the form of additional revenue, so the merger was not only about cost synergies. Meanwhile, the shares of the new Chubb Corp (NYSE:CB) are trading at a forward P/E multiple of 10.95, which is below the average of 11.70 for the Property & Casualty Insurance industry. Clint Carlson’s Carlson Capital LP reported owning 1.92 million shares of Chubb Corp (NYSE:CB) through its 13F for the fourth quarter.

We have four more of the Dan Loeb’s biggest fourth quarter moves on the next two pages.