Dan Loeb’s Large Cap Stock Picks To Avoid

By analyzing the 13F filings of Third Point, managed by Dan Loeb, we estimate that his large-cap stock picks (those with market caps between above $20 billion) returned, on average, 0.00% per month between 1999 and 2012. This is worse than the 0.35% monthly total return for the S&P 500 during the same time period. If we adjust for risk by utilizing Carhart’s four factor model, Loeb’s large cap stocks look worse, generating negative alpha of 24 basis points on a monthly basis. His performance gets even worse on a more recent basis (between 2008 and 2012), with Loeb’s large-cap stock picks generating average monthly alpha of negative 47 basis points on a risk-adjusted basis. In general, our research concludes that most investors, including hedge funds, cannot generate enough outperformance to justify their high fees when it comes to larger cap stocks. Our research also shows that hedge fund managers are generally good when it comes to picking small cap stocks. We believe investors can generate better returns if they avoid hedge funds’ larger stock picks and focus on their smaller-cap stocks. By using a similar approach Insider Monkey’s small-cap hedge fund strategy returned 88% since the end of August 2012 and outperformed the market by nearly 50 percentage points (see the details here). Now, we will take a closer look at Loeb’s top five large cap picks.

Dan Loeb THIRD POINT

American International Group (NYSE:AIG) is Loeb’s top large-cap stock, with his 7.5 million shares valued at $385 million. He cut his stake in the multi-line insurance company by 25% during the fourth quarter of 2013 but the stock remains his largest holding, accounting for almost 7% of his entire equity portfolio. Other hedge fund managers holding the stock include Bruce Berkowitz of Fairholme, Harris Associates and William Gray of Orbis Investment Management.

Second on the list is FedEx Corp. (NYSE:FDX), in which Loeb owns 2.5 million shares worth approximately $360 million. He increased his stake by 25% during the fourth quarter, with the $39.4 billion market cap delivery services provider comprising more than 6% of his total equity holdings. He joins other hedge fund managers that are bullish on the shares, including Mason Hawkins of Southeastern Asset Management, Harris Associates and Edgar Wachenheim of Greenhaven Associates.

Dow Chemical Co. (NYSE:DOW) is third in line among Loeb’s large cap holdings, with his 7.7 million shares worth about $345 million. This was a new position initiation during the fourth quarter, with the chemical products manufacturer making up almost 6% of the fund’s portfolio. Loeb joins Colin Hall and James Davidson of Long Oar Global Investors, Stephen Loukas, David A. Lorber and Zachary George of FrontFour Capital Group, Daniel Lascano of Lomas Capital Management and other hedge fund managers in taking a bullish view on the stock.

Fourth on the list is Yahoo Inc. (NASDAQ:YHOO), in which Loeb owns 8.0 million shares valued at approximately $325 million. This was a new position for him, with the technology company making up about 6% of Third Point’s portfolio. Other shareholders we track that own the stock include Alex Sacerdote of Whale Rock Capital Management, Josh Resnick of Jericho Capital Asset Management and Jesse Ro of Tiger Legatus Capital.

Rounding out Loeb’s top five large cap list is T-Mobile US Inc. (NASDAQ:TMUS), in which he owns 7.6 million shares worth roughly $260 million. This was also a new position for Loeb’s equity portfolio, more than 4% of which is accounted for by the wireless telecommunications provider. Other hedge fund managers that are shareholders include John Paulson of Paulson & Co., Rob Citrone of Discovery Capital Management and James Dinan of York Capital Management.

Disclosure: none

Recommended Reading:

Hedge Fund News: Jim Chanos, Edward Lampert & Dan Loeb

Hedge Fund News: Phil Falcone, Marc Lasry & Daniel Loeb

Third Point Upps its Stake In Sothebys (BID); Nominates Directors to the Board

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!