Third Point Management, a New York-based investment advisor, released its fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. The Third Point Offshore Fund returned nearly 9.1% in the fourth quarter bringing the yearly returns to 24.2%. The performance was driven by positive results across all strategies – equities, corporate and structured credit, and privates. In addition, please check the fund’s top five holdings to know its best picks in 2024.
In its fourth quarter 2024 investor letter, Third Point Management emphasized stocks such as PG&E Corporation (NYSE:PCG). PG&E Corporation (NYSE:PCG) engages in the sale and delivery of electricity and natural gas to customers. The one-month return PG&E Corporation (NYSE:PCG) was -9.14%, and its shares lost 4.00% of their value over the last 52 weeks. On February 6, 2024, PG&E Corporation (NYSE:PCG) stock closed at $15.60 per share, with a market capitalization of $34.22 billion.
Third Point Management stated the following regarding PG&E Corporation (NYSE:PCG) in its Q4 2024 investor letter:
“We are devastated by the recent events in Southern California. Several of our family members and team members call Los Angeles home, and our hearts are with all impacted by the fires.
While PG&E Corporation (NYSE:PCG) does not operate in this region, there is press speculation that one of the fires, Eaton, may have been related to transmission equipment owned by SoCal Edison (SCE), another investor-owned utility (parent company Edison International.) Edison has stated publicly that they do not believe their equipment was involved. The investigation is ongoing, and we believe it is premature to make conclusions about the origin of the fire…
If the Eaton fire ignition was related to SCE equipment, the California legal standard of “inverse condemnation” exposes SCE to resultant property damage liabilities. After PG&E’s bankruptcy in 2019, California passed a bill called AB1054 which protects the state’s investor-owned utilities (Edison, PG&E and Sempra) from these liabilities as long as they adhere to a rigorous safety standard. This includes a comprehensive wildfire mitigation plan approved annually by the government and a commitment to spend billions to harden the grid; for example, PG&E is spending a whopping $18 billion on wildfire mitigation from 2023 -2025. In exchange, AB1054 includes several protections, such as a legal prudency standard that entitles the utility to cost recovery via multiple avenues in the event of a catastrophic fire and a $21 billion insurance fund to cover incurred liabilities. SCE has an active safety certificate and thus should benefit from the protections under AB 1054, just as PG&E would in case of a future fire. Regulator-approved cost recovery is a routine proceeding for utilities in areas prone to severe climate events (hurricanes, tornadoes, earthquakes, etc.) in acknowledgement of the fact that it is not feasible to remove all risk from overhead grid infrastructure. PCG has been the preeminent advocate in California for undergrounding, which we believe is the only way to permanently eliminate wildfire risk from grid assets…” (Click here to read the full text)
Brightly-lit nighttime view of an electricity power grid with distribution lines and transmission substations.
PG&E Corporation (NYSE:PCG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 49 hedge fund portfolios held PG&E Corporation (NYSE:PCG) at the end of the third quarter which was 46 in the previous quarter. While we acknowledge the potential of PG&E Corporation (NYSE:PCG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article we discussed PG&E Corporation (NYSE:PCG) and shared the list of stocks that took a nosedive in January. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.