Last quarter we discussed the growing similarities between Loeb’s Third Point and the composition of the Nasdaq 100. Historically Loeb has been into energy and healthcare stocks which still make up a sizable portion of the fund's holdings concentration. It is still quite top heavy; 10 stocks take up some 70% of their AUM with PG&E Corp. and Microsoft still holding the top spots and Amazon taking over Danaher Corp for third. Turnover was higher this quarter than we have seen previously. They closed a total of seven positions and drastically decreased two.
This included their Google and Uber positions both of which had been opened in the last year and were indications of Third Points growing similarities to the Nasdaq's composition. In total they hold 35 stocks down from 36 last quarter and AUM remained almost identical with a change of only around $10 million.
New Positions:
-Verizon Communication (VZ):
In what was probably the largest trade the fund made in Q4 they purchased 4,675,000 shares of telecom giant Verizon while simultaneously closing out their T-Mobile position. Shares would have been purchased between $30 and $38. Today the stock trades around $40 putting the market value of this position close to $190 million. It currently takes up about 3% of Third Points AUM.
FLEETCOR Technologies (FLT):
This appears to be a more value-oriented play which is more in line with the investing we have seen previously from Loeb. The company provides payment processing software and trades at an attractive P/E ratio of 14x while growing revenue now for its fourth straight year. Shares would have been purchased between $222 and $282 and today they trade close to $280. With 615,000 shares that makes their position valued at $172 million.
There was a total of 6 new positions added in Q4. Others include Apollo Global Management, another healthcare play in Mckesson Corporation, as well as BioMarin Pharmaceutical and EQT Corporation.
Expanded Positions:
-United States Steel Corporation (X):
In December the company agreed to be purchased by Japanese firm Nippon Steel for $55 per share in a deal that valued the company at more than $14 billion. Interestingly Loeb opened this position in Q3 prior to the deal being closed and while other firms like Cleveland-Cliffs were still openly bidding for X. In Q4 he added another 750,000 shares to his portfolio, an increase of about 16%. Third Point now holds 5.5 million shares of X making it their sixth largest holding.
Only 4 positions were expanded on in Q4 and none other than X were particularly noteworthy. They grew the $PCG position just slightly, adding a million shares to the 56 million they previously held. The American International Group saw a 17% increase and a micro stock called Vast Renewables Limited in the renewable energy space saw a 27% increase.
Reduced Positions:
-Uber Technologies Inc (UBER):
Despite the stock more than doubling in the last year, Loeb seems to have lost interest as his fund sold 70% of its position in the rideshare giant. They unloaded a total of 3.2 million shares throughout Q4 while it traded in the $40 to $64 range likely netting them a solid gain seeing as they first bought shares in Q2 of 2023 for between $30 and $40. That said shares have risen to as much as $80 in the first quarter of this year so they have missed some potential gains but they also still hold a million shares in their portfolio.
-Taiwan Semiconductor Manufacturing (TSM):
Third Points TSM position has essentially been cut in half over the last 6 months despite having opened it only 6 months ago as well. Considering the performance of Chinese financial markets as well as the political and economic ties between Taiwan and China it’s not a huge surprise to see this position reduced so significantly after just being opened. At the same time the semiconductor industry has been extremely hot as exemplified by Nvidia stock recently and TSM has followed suit gaining more than 40% since Third Point opened its position so they could have also just been taking profits along the way. They still hold close to 1.2 million shares.
-Intercontinental Exchange (ICE):
ICE went from 8th largest holding to 17th as it was cut by more than 70% in Q4. This was a position Third Point had also just recently opened in Q2 of 2023 for between $104 and $114 per share. Shares were flat for most of the remainder of the year until December when they jumped to nearly $130 each and since, they have risen to close to $140 per share. Third Point still holds 700,000 shares of the financial markets tech firm but considering when they sold such a large portion of the position this may not have been quite the trade, they had on TSM or UBER.
11 positions were reduced in total. Additional reduced positions include Amazon and Microsoft both of which are in the funds top ten holdings as well as stocks like Ferguson, DuPont and Jacobs Solutions which are all industrial, manufacturing, or materials-oriented firms.
Closed Positions:
-Alphabet (GOOGL):
At the end of Q1 last year this was Third Points fifth largest holding with a market value around half a billion dollars, now it has been completely closed out. Still the stock has gained more than 30% during that time and has never fallen below the funds acquisition price, likely making this a very solid trade for them.
-T-Mobile US (TMUS):
Loeb certainly seems to be making some sort of play in telecommunications seeing as he sold the brand new and relatively large T-Mobile position and replaced it with nearly identically sized Verizon position. Third Point had just bought 1,000,000 TMUS shares in Q3 for between $133 and $140 which they could have sold for as much as $160 late in December.
Loeb and his fund also exited Option Care Health (BIOS), RBC Bearings (ROLL), ProPetro Holding Corp (PUMP), and Fidelity National Information Services (FIS)
Final Overview:
Overall, the portfolio’s time as a ‘mini-Nasdaq (QQQ)’ seems to have been relatively short lived as many of the tech stocks have been cut down or entirely closed out. The fund has seemingly returned their interest to health care and energy-oriented stocks almost as if to say perhaps the run up on tech stocks in 2023 has come to an end. With uncertainty around rate decisions later this month and increasing inflation indicators Loeb may have had some of the best-timed trades in 2023 but only time will tell. He now has holdings in just two of the seven stocks that have carried the S&P 500 (SPY) this year; previously it was five of the seven.
