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.

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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.

Third Point added 2 million shares of Monsanto Company (NYSE:MON) during the second quarter, the market value of which at the end of the quarter stood at $206.82 million. The number of hedge funds tracked by us that were long Monsanto at the end of the second surged to 87 from 51 during the second quarter, while the total value of their holdings jumped to $5.32 billion from $2.45 billion. The increase in popularity can be attributed to discussions about a potential takeover and a couple of weeks ago (after months of pursuit) Monsanto Company (NYSE:MON) finally agreed to be acquired by Bayer for $128 per share. The deal is valued at approximately $66 billion including debt. Even though several analysts upgraded Monsanto’s stock following the announcement, some of them, including Goldman Sachs and Bernstein, cautioned investors about the possibility of certain developments that might affect the transaction. Monsanto’s stock inched down by around 1.2% in the third quarter and is only 4% in the green year-to-date, despite the jump it registered back in May when Bayer approached it with its first offer.

Another addition to Third Point’s portfolio in the June quarter was Sherwin-Williams Co. (NYSE:SHW), in which the fund held a 700,000-share stake valued at $205.57 million. A total of 45 of the funds we track held $2.17 billion worth of Sherwin-Williams shares at the end of the second quarter. The stock lost nearly 6% between July and September, plunging in July on the back of weaker-than-expected EPS and revenue posted for the second quarter. Sherwin-Williams is scheduled to release its third-quarter results on October 27 and analysts anticipate earnings of $4.33 per share on revenue of $3.29 billion.

Third Point added 950,000 shares of Shire Plc (NASDAQ:SHPG) to its equity portfolio during the second quarter. The stake was worth $174.88 million at the end of June. There were 64 funds in our database that held shares of Shire at the end of the June quarter, compared to 49 funds a quarter earlier. The stock advanced by 5% during the third quarter, but is still over 4% in the red year-to-date. Recently. Shire has announced that a U.S. District court ruled in its favor in a patent infringement case against generic competitor Cadila Healthcare Ltd. The lawsuit is related to U.S. Patent No. 6,773,720 covering ulcerative colitis med Lialda (mesalamine). In other news, Shire also recently has got an approval from the FDA for its CUVITRU [Immune Globulin Subcutaneous (Human) 20% Solution] for the treatment of adult and pediatric patients at least two years old with primary immunodeficiency (PI).

Disclosure: none