Dan Loeb is well known for writing harsh public letters to the CEOs in regards to the performance and conduct of the company. In 2012, with one of his letters he was successful in removing Yahoo! Inc. (NASDAQ:YHOO)'s former CEO Scott Thompson and himself became member of the Yahoo Board holding a huge stake in the company with 73,000,400 shares. In this article, I am trying to analyze three top holdings on his portfolio and how they should perform in 2013.
|Company||No. of Shares||Percentage of portfolio|
|Yahoo! Inc. (NASDAQ:YHOO)||73,000,400||23.00%|
|American International Group, Inc. (NYSE:AIG)||2,3500,00||15.20%|
|Apple Inc. (NASDAQ:AAPL)||710,000||9.50%|
Yahoo! Inc. (NASDAQ:YHOO)
Yahoo has seen many ups and down in the last several quarters, be it the decline in its core business where traffic was down 24% (search) and 12% (mail) in December 2012 as compared to 2011 or the controversies related to its management. But, despite these fluctuations, I remain confident about Yahoo's growth story with the Alibaba IPO valuation, which is anticipated to be $60 billion. Yahoo reported $3.1 billion of net income in 3Q12 by selling a part of its stake in the Alibaba Group, one of the most valuable internet companies with a valuation of $35 billion. Yahoo announced that it will be selling just one half of the remaining stake at the time of Alibaba's IPO. Also, the company will be selling its stake in Yahoo Japan and 50% of the proceeds generated with it will be used for buybacks.
The company remains committed towards its share repurchase and has announced its intention to repurchase $3.6 billion of shares in 2013 from the proceedings generated by selling its stake in the Alibaba Group. On the other hand, mobile is still a challenge for Yahoo with no material mobile advertising till now, and the urgent need to monetize its mobile subscriber base. For this the company is making efforts to be a leader in the mobile business by 2015 and as part of its efforts in this direction launched a new application Flicker for the iPhone to compete with Instagram.
American International Group, Inc. (NYSE:AIG)
2013 seems to be a capital management story for AIG. The company recently sold its remaining 13.7% stake in AIA thus generating $6.5 billion in proceeds. AIG has been focusing on selling its non-core assets and generating capital in order to meet its general corporate purposes and moreover to make a repayment to the US government. Since 2010 the company has been slowly reducing its stake in AIA. Before this transaction, the company sold its 90% stake in International Lease Finance Corporation (ILFC) for $4.7 billion to Chinese investors considering it a non-core asset. Moving forward this capital management will continue till 2015 involving $12 billion to $17 billion.
AIG also has huge capital in order to make buybacks which is estimated to be more than ~$ 3.1 billion from 2013 to 2015. The robust capital deployment over the coming years will drive in $4 billion to $5 billion in excess capital generation. It is expected that the company will be having $18.9 billion in capital at the end of 2013 and $29.3 billion of capital deployment from 2012 to 2015. AIG has been successful in shedding its risky business at an impressive valuation resulting in improvements in its financial leverage and also reduction in its interest expense load.
Apple Inc. (NASDAQ:AAPL)
AT&T Inc. (NYSE:T) recently announced that it sold a record breaking 10 million smartphones in 4Q12, which is up 6.6% y/y. And it is accepted that it was because of the higher mix of iPhones as it sold more than 8.1 million of the iPhone in the quarter. On the other hand Verizon also revealed that more than half of its activations were made by iPhone in the last quarter. This tremendous performance of Apple Inc. (NASDAQ:AAPL) with the combination of its brand innovation makes the future outlook for the company very positive. iPhone remains the bread and butter for Apple Inc. (NASDAQ:AAPL) as it generates 50% of its profit from this segment only and also captures 50% of the US market share.