How Billionaire Dan Loeb’s Top New Picks Performed in Q3?

Third Point is a New York-based hedge fund founded and managed by billionaire Dan Loeb, who is known for taking an activist investing approach, which often involves him taking a large position in a company and urge the management to unlock shareholder value through restructuring, spin-offs or even a possible sale.

The equity value of Third Point’s portfolio at the end of the second quarter stood at nearly $10.5 billion, slightly down over the quarter. The fund’s largest exposure was to healthcare stocks, which accounted for 36% of the portfolio, followed by materials and consumer discretionary sectors, which amassed 16% and 14% of the equity portfolio, respectively. During the second quarter, Third Point initiated stakes in 19 companies and in this article we are going to take a look at its five largest new positions and their third-quarter performance.

We determine hedge fund sentiment by analyzing the equity portfolios of some of the best-performing hedge funds and institutional investors. Through extensive research, we have determined that the due diligence that these investors employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also showed that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).

In Facebook Inc (NASDAQ:FB), Third Point initiated a stake containing 3.75 million shares worth $428.55 million at the end of the quarter. Overall, 148 funds in our database were long Facebook at the end of the June quarter, holding $15.24 billion worth of shares, which made Facebook the most popular stock among the investors we track. During the third quarter, the stock gained 12% and is 22% in the green year-to-date amid better-than-expected results and certain developments that kept the stock in the spotlight throughout the year. Recently, Facebook launched a number of features for its WhatsApp and Messenger platform, as well as rolled out its new “Marketplace” section, which should position it better to take advantage of the e-Commerce space currently dominated by eBay and Amazon.

Charter Communications, Inc. (NASDAQ:CHTR) was Third Point’s largest position in the Consumer Discretionary space at the end of the second quarter. The fund bought 1.45 million shares worth $331.53 million during the second quarter, joining 133 other funds from our database that were long Charter Communications at the end of the second quarter, versus 98 funds that held shares a quarter earlier. The increase in the number of funds long the stock came amid the completion of Charter’s acquisition of Time Warner Cable, which included a share portion. The stock gained 18% in the third quarter. Guggenheim recently resumed coverage on Charter Communications. The brokerage now has a Buy rating on the stock, with a $300 price target. In its research note, Guggenheim noted that Charter’s financial growth potential continues to be underappreciated. Guggenheim expects strong subscriber and revenue growth as the company wins market share.

Read about Third Point’s three other major purchases during the second quarter on the next page.