Billionaire Dan Loeb’s Biggest Q4 Moves Include Bank-Buying Spree, Selling Allergan (AGN)

With the 13F filing deadline here, we’re now wading into the deluge of filings from some of the top minds in the finance industry. In particular, we’re closely monitoring overall sector trends in hedge fund ownership to see how money managers were positioning themselves following Trump’s upset in the Presidential elections.

Dan Loeb‘s Third Point was one of the first major funds to have filed its 13F for Q4 2016, which it did on Friday, and its filing showed exactly the kind of sector reshuffling that we’re watching out for. The billionaire’s hedge fund made several big moves during the final quarter of 2016, including opening large positions in Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM), and selling off a prominent position in Allergan plc Ordinary Shares (NYSE:AGN).

Overall, Third Point’s 13F exposure to the finance sector shot up to 13.81% from just 3.85% a quarter earlier, while its exposure to healthcare stocks declined to 28.8% from 34.53%. It’s been two years since Third Point had this much exposure to finance stocks and this little exposure (relatively speaking) to healthcare stocks. Third Point’s exposure to tech stocks also dipped by 6.43 percentage points, to 11.35%, as the fund sold off its stake in Alibaba Group Holding Ltd (NYSE:BABA) and also trimmed its positions in Facebook Inc (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL), and Alphabet Inc (NASDAQ:GOOGL).

However, in this article we’ll focus on the four biggest additions to Third Point’s portfolio during the previous quarter, as well as the largest holding which it sold out of during the period. For more hedge fund-related reading (after you’ve finished this article of course), don’t miss our comprehensive article of the 140 Biggest and Most Famous Activist Hedge Funds, in which Mr. Loeb’s fund ranks highly.

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Bank of America Corp (NYSE:BAC)

– Shares Owned by Third Point (as of December 31): 17.5 Million
– Value of Third Point’s Holding (as of December 31): $386.75 Million

We’ll start with Third Point’s addition of Bank of America Corp (NYSE:BAC) to its portfolio, with the position consisting of 17.5 million shares valued at $386.75 million on December 31. The big move into banking stocks is not entirely surprising, as they are expected to benefit both from rising interest rates, as well as from President Trump’s efforts to dismantle the Dodd-Frank Act.

The POTUS has already signed an executive order to roll back the regulations enacted by the Act, which place several restrictions on large banks and arguably prevent them from being as efficient as they could be. Of course, the Act wasn’t in place when these same financial institutions nearly imploded and destroyed the global economy through their ineptitude, so moaning and groaning about the shackles placed on them since then seems to be flimsy at best, downright asinine at worst.

Nonetheless, Trump is planning on doing just that and investors are bullish on banks as a result; Bank of America has gained over 37% since Trump’s election. There are already 15 other hedge funds in our database that have reported having opened positions in Bank of America during Q4, so we’re anticipating a big spike in ownership.

JPMorgan Chase & Co. (NYSE:JPM)

– Shares Owned by Third Point (as of December 31): 5.25 Million
– Value of Third Point’s Holding (as of December 31): $453.02 Million

Let’s move on to JPMorgan Chase & Co. (NYSE:JPM), which was the largest new position added to Third Point’s 13F portfolio in Q4, with its new stake being valued at over $453 million at the end of 2016. JPMorgan has also been a strong performer since Trump’s election, gaining nearly 26%. According to Morgan Stanley analysts, JPMorgan has $21.2 billion in excess equity capital that could be used to fund share buybacks or hike its dividend payments in the near future. JPM already has one of the most attractive dividends in the industry, with a forward dividend yield of 2.18%.

Top hedge funds were also enthusiastic about JPMorgan in Q4 according to the 13F filings released thus far, with 11 other funds opening new stakes in the stock. Among them was Philippe Laffont‘s Coatue Management, with a position of 1.88 million shares worth $162 million.

We’ll check out two more big purchases made by Dan Loeb’s Third Point on the next page, as well as check in on its Allergan position (or rather, former position).

Time Warner Inc (NYSE:TWX)

– Shares Owned by Third Point (as of December 31): 3 Million
– Value of Third Point’s Holding (as of December 31): $289.59 Million

Third Point added a 3-million share stake in Time Warner Inc to its portfolio in Q4, slotting in just behind David Abrams‘ Abrams Capital Management, which opened a position of 3.05 million shares. Time Warner Inc is holding a special shareholder meeting at 3 PM today as it puts its shareholders to the task of voting on the company’s proposed $86 billion merger with AT&T Inc. (NYSE:T). President Trump has been a vocal critic of the deal (and of Time Warner’s CNN in general), reportedly stating to a confidant in early-January that the deal “would consolidate too much power in the media industry”, despite AT&T primarily being a telecom provider. The issue of the merger was not discussed when Trump met with AT&T’s CEO Randall Stephenson on January 12. On the issue of CNN, AT&T has stated that it will not consider divesting that asset as a means to achieve regulatory approval for the merger.

Zayo Group Holdings Inc (NYSE:ZAYO)

– Shares Owned by Third Point (as of December 31): 7 Million
– Value of Third Point’s Holding (as of December 31): $230.02 Million

Speaking of telecom companies, Third Point also opened a 7 million-share position in Zayo Group during the fourth quarter, a company which provides fiber and bandwidth connectivity services in addition to cloud services. It’s been a rocky ride for the stock thus far in 2017, with it having fallen by nearly 5%. The company reported disappointing bookings in its fiscal second quarter financial results, with revenue missing estimates. Nonetheless, analysts remain confident that demand will rebound and suggest that the company could also make for an attractive acquisition target in the future. Zayo expects to close on its $1.42 billion deal for Electric Lightwave by the end of this quarter, which will expand its network in several key markets, including Seattle and San Francisco.

Allergan plc Ordinary Shares (NYSE:AGN)

Lastly is Allergan, which Dan Loeb and his team disposed of during the fourth quarter. Third Point’s position had consisted of 3.79 million shares on September 30, and was the fund’s third-most valuable at that time (though it also cut its position by 22% in the third quarter). The timing of its exit does not seem to have worked out well for the fund, as Allergan shares sank to 52-week lows during the fourth quarter, but have rebounded strongly this year, gaining over 18%.

Allergan announced on Monday that it will acquire CoolSculpting System developer Zeltiq Aesthetics Inc (NASDAQ:ZLTQ) for $2.47 billion. Allergan had previously been connected to Zeltiq’s peer Cynosure, Inc. (NASDAQ:CYNO), which fell following the news that Allergan would instead buy its rival. However, Cynosure was snatched up just a day later by Hologic, Inc. (NASDAQ:HOLX), as M&A activity in the aesthetics market heats up.

Disclosure: None