Dan Loeb the founder of Third Point is known as a hedge fund manager often using activist investment approaches. He is known for publicly criticizing CEOs and other executives aiming to make positive shifts in business operations. Dan Loeb’s portfolio holdings are valued at $7 billion, and divided among 34 investments.
A handful of holdings take the majority of the portfolio with the biggest being PG&E Corp. After a power generation company in the first place, in second and third places come tech giants Microsoft Corp and Amazon.com Inc. Other significant holdings include Bath & Body Works Inc and Meta Platforms Inc.
Third Point’s portfolio peaked in 2022 with almost $18 billion AUM, but soon after it fell to the current $7 billion. It was also followed by a streak of negative performance, with a particularly negative 2022. By the end of 2023, the fund managed to barely generate positive returns, but at least the tide is turning. For more information about Dan Loeb’s portfolio and strategy stay with us.
Current Top Holdings
- PG&E Corp. (NYSE:PCG) with 13.5% of the portfolio
Third Point is by far the biggest stakeholder in the California-based electricity manufacturer owning 57.9 million shares. They are valued at $960 million and this holding brought a gain of 72% since they started trading it in 2002. In those 21 years, Loeb invested $557 million. Last year was busy since the fund was bought on three occasions and sold once. These trades reduced the holding size to 800 thousand while the share price continued to steadily rise.
- Microsoft Corp (NASDAQ:MSFT) with 11.59% of the portfolio
Since Loeb started trading Microsoft stocks in 2006 he invested a total of $568 million. Now he owns 2.02 million stocks valued at $821 million netting a gain of 45%. In 2023 he bought two and sold them on two occasions, and increased his position for about 850 thousand stocks.
- Amazon.com Inc (NASDAQ:AMZN) with 10.29% of the portfolio
Although Loeb has been trading Amazon stocks for years, the majority of the current 4.2 million stocks he bought in 2023. He paid for most of them a very good price of $114 when we take into account their current value of $173 just half a year later. This major portfolio reshaping delivered him a short-term gain of 49%.
- Bath & Body Works Inc (NYSE:BBWI) with 9.27%
This retailer of cosmetics and hygienic products is the 4th biggest holding in Loeb’s portfolio. A relatively new holding going back to Q3 2022 in which Loeb has been strengthening his positions. He raised his stake to 13.9 million shares which takes 6.1% of all company stocks. Since then the price has risen from $36 to the current $47 generating a gain of 31%. His investment of $500 million turned into $657 million in a relatively short time frame.
- Meta Platforms Inc Class A (NASDAQ:META) with 7.97% of the portfolio
After a two-year pause in trading Meta stocks, Loeb restarted this holding in Q3 2023. Loeb bought 1.1 million shares at $300 and since then their price skyrocketed to $487. His initial investment was $351 million and in the current Meta boom, it grew to $565 million.
- Danaher Corp (NYSE:DHR) with 7.37% of the portfolio
Danaher, a diagnostic innovator, is one of Loeb’s all-time favorites. He has always kept a solid stake in the company since 2015 and it proved to be an excellent investment. Loeb invested $188 million and it turned in $522 million with a gain of 178%. The stock price did fall in 2023 from $260 to below $200, but in 2024 it is back on track with a current value of $255. The latest trade in this holding happened in late 2023 with the selling of 400 thousand shares.
- United States Steel Corporation (NYSE:X) with 3.68% of the portfolio
Loeb did a short stint in trading X shares in 2003 and 2004 but only in 2023, he decided to start trading them again. Valuation metrics show that these stocks may be undervalued which if true could be a sign of good acquisition. He bought a total of 5.5 million stocks for $160 million. In a very short period, their value grew to $261 million netting a gain of 62%.
Recent Additions to The Portfolio
- Verizon Communications Inc. (NYSE:VZ). In 2023 their stock prices were down from $40 to $30. But, by the end of the year stock price began to rise, when Loeb bought a massive stake of 4.8 million stocks at $35. The stock price continued its steady rise to the current $41. It makes up 2.63% of Loeb’s portfolio.
- Fleetcor Technologies Inc (NYSE:FLT). Loeb did trade these stocks earlier, exiting from the holding in 2015. In Q4 he bought 615 thousand shares at $248. The share price is for now on the rise, reaching $278. This holding makes up 2.48% of the portfolio.
- Apollo Global Management Inc Class A (NASDAQ:APO). Apollo shares have been rising since the beginning of 2023 and Loeb caught them early at $88. In Q4 he bought a stake of 900 thousand shares making 1.1% of the portfolio. In the meantime, their price skyrocketed to $110.
Notable Exits
- Option Care Health Inc (NASDAQ:OPCH). Loeb bought OPCH stocks on two occasions at $33 and $30 acquiring 5.45 million stocks. In Q4 he sold the entire holding for $30 with a slight loss on the trade.
- Alphabet Inc Class A (NASDAQ:GOOGL). In Q1 2023 Loeb bought 4.75 million shares at $95 per share. By the end of the year, he exited from the holding in three sales at $115, $129, and $134 respectively.
- Nvidia Corp (NASDAQ:NVDA). Loeb bought and sold 500 thousand Nvidia stocks in a very short time frame. He bought them at $332 and sold them at $448.
- Alibaba Group (HKG: 9988). Like with Nvidia, Loeb bought a massive stake in Alibaba in the first two quarters and quickly sold it. His total stake was 2.95 million shares bought for $100 and $87 respectively. He sold the entire holding in Q3 for $91.
Sector Allocation
Third Point LLC has a portfolio focused on tech and consumer discretionary sectors but is evenly diversified among different industries. Their current sector allocation is:
- Technology with 25.7% of the portfolio valued at $1.82 billion
- Consumer Discretionary with 20.5% of the portfolio valued at $1.45 billion
- Utilities with 16.9% of the portfolio valued at $1.19 billion
- Industrials with 12.2% of the portfolio valued at $866 million
- Materials with 9.2% of the portfolio valued at $655 million
- Finance with 6.3% of the portfolio valued at $445 million
- Real Estate with 4.2% of the portfolio valued at $301 million
- Telecommunications with 3.3% of the portfolio valued at $237 million
- Energy with 1% of the portfolio valued at $71.2 million
- Healthcare with 0.5% of the portfolio valued at $34.9 million.
Dan Loeb Portfolio Holdings Performance Analysis
Historical Performance Overview
Since the inception of the fund in 1995 it delivered annual returns in the range of an average of 16%. It managed to deliver consistent positive returns which had a positive impact on attracting new investors.
Loeb’s success was particularly seen during the dot.com bubble at the end of 2000. Then it massively outperformed the market and repeated the same success during the 2008 economic crisis. Despite the overall downturn of the financial markets his funds managed to generate 45% returns in 2009.
His streak of exceptional performance continued until 2022 when the fund declined by 22%. In the last year, they managed to get back on track with a low gain of 3.6%.
The main reason for these bad results is the inefficiency of his shorting attempts and several failed activist campaigns. Daniel Loeb noted that shorting has increased the vulnerability of his fund and that he will decrease the sizes of his short bets.
Also, it is worth noting that Loeb missed out on the massive rise of AI-based companies. He exited Alphabet and Nvidia when the price was on the rise, causing investors to distrust. Just in 2023, investors pulled out of his funds more than $850 million.
Dan Loeb Investment Philosophy and Strategy
Dan Loeb Investment philosophy and strategy is bolstered by four cornerstones:
Activist Investing
Dan Loeb is first and foremost known as an activist investor. This type of investing includes acquiring big chunks of ownership in the company to get a few seats on the board. Sometimes the goal is to get a controlling stake, but in most cases, voting rights are a must.
Once inside Dan Loeb and his people can push for changes in the company. This can revolve around changing operation processes, strategic shifts, or changes in the management team. The result is a company that performs better with lower costs, and that can generate high returns in the long term.
A good example of Loeb’s activist investing is the case of Yahoo from 2011. He bought 5% of their stake and wanted to make some strategic shifts in operations and management. He eventually managed to do it, and a later trade brought him over $1 billion in gains.
Distressed Debt Investing
When a company is filing for bankruptcy or is near that moment, an investor who decides to buy their bonds is called a distressed debt investor. Loeb used this strategy many times in the past. This is a risky approach because it can go both ways, bringing massive gains or losses.
When the company is in very bad shape it is selling its bonds at major discounts, which attracts investors that are willing to take a risk. But, before Loeb decides to invest he goes into a deep analysis of the company. It is important to calculate the risk and see if it is possible to gain something from the investment.
Loeb in 2012 invested in Greek sovereign bonds in the middle of the sovereign debt financial crisis in Greece. He and his team evaluated the risk ratio and concluded that the reward was much higher than the risk, and went in. This brought solid returns, which contributed to an already excellent performing 2012.
Spin-Offs
Spin-offs are companies that in the past were a part of a bigger parent company. They become independent in cases of neglect from the parent company. This way they want to attract investors and increase their overall potential once outside of the parent company’s influence.
Loeb in his investment career was more keen on creating spin-offs than investing in already available spin-off companies. He recently used his activist approach with Sony and Shell to create spin-off companies but has failed in this attempt.
Value Compounding
Loeb recognized the benefits of investing in companies with competitive advantages, and he took that from Warren Buffett. To find a company that has the potential to compound value over time, an investor must dig deep. He must analyze not only the company, but also its competitive landscape, the whole industry sector, and market prediction.
A good example where Loeb resorted to this technique is Amazon. He increased his stake early because he believed that Amazon had all the right characteristics to make it big in the long term. It did come through, with Amazon becoming the single biggest player in its sector.
Take A Look At Dan Loeb – Trading Strategy that Made Him Billions:
Impact of Economic Trends
The impact of Economic trends on Dan Loeb’s portfolio after the last two years of abysmal performance drop is clear.
The first issue was with the rising interest rates. Once they began to rise Loeb adopted a more cautious approach. That extra level of carefulness dampened his stock market valuations resulting in more challenges for companies to create growing profits. His cautious approach also left out Loeb from potential high gains from sectors that are currently rising.
This can be seen from his early sales of Alphabet and Nvidia stocks which are on a winning streak. Also, he currently does not own a major holding in any of the AI-oriented giants. These are reaping high returns for a year with no signs of slowing down.
This is closely connected with not identifying a shift in the market landscape. AI and tech sectors are on the big rise and he has missed an opportunity to jump in the wagon early.
If he now decides to enter this market it would demand a lot of capital. A capital that he lost in 2022 and 2023. Just during 2023, investors pulled out of his funds approximately $850 million. This couldn’t go without hurting the overall Third Point’s reputation.
Sustainability and ESG Considerations
Loeb’s investment strategy in the past didn’t incorporate either sustainability or ESG factors into consideration. But, in recent times he has taken them into account. Loeb, who was sometimes under pressure from companies from his portfolio, started to pay attention to factors like climate change and diversity in boards.
Another step in this direction was acknowledging and recognizing companies that are focused on the production of renewable energy. He showed an increased interest in companies from that sector, with potential investing in those further down the road.
FAQs
What Are the Top Holdings of Third-Point Capital?
The top holdings of Third-Point Capital are:
- PG&E Corp. with 13.5% of the portfolio
- Microsoft with 11.59% of the portfolio
- Amazon with 10.29% of the portfolio
- Bath & Body Works Inc with 9.27%
- Meta Class A with 7.97% of the portfolio
- Danaher Corp with 7.37% of the portfolio
- United States Steel Corporation with 3.68% of the portfolio
- Jacob Solutions Inc (NYSE:J) with 3.64% of the portfolio
- American International Group Inc (NYSE:AIG) with 3.53% of the portfolio
- DuPont de Nemours Inc (NYSE:DD) with 3.4% of the portfolio.
How Much Is Dan Loeb Worth?
Dan Loeb’s worth varies from source to source. Several sources put his worth between $1.8 billion and $3.5 billion. But, it is most likely that his worth falls in the $3.3 billion range.
Final Thoughts
Activist and debt-distressed investing was always considered to be high-risk and high-reward investment strategies. Throughout his career, Dan Loeb managed to adjust and play around the market with great success.
But, in the last two years, an over-cautious approach got the worst out of him. Returns were in a huge downfall, with investors leaving left and right.
From the latest announcements, Loeb decided to start investing in private credit, where he sees a new array of opportunities. How will this shift in strategy impact his portfolio time will tell. But, missing out on the AI and tech boom of 2023 will haunt him for sure.
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