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Dan Loeb’s Newest Stock Picks

Dan Loeb’s Third Point returned 41.5% in 2010. Third Point’s flagship fund gained 38.2% in 2009 after losing 32.8% in 2008. The returns prior to 2008 were also spectacular. We also analyzed Dan Loeb’s monthly returns in detail using regression analysis. In the three and a half years ending December, 2010, Daniel Loeb had a monthly alpha of 61 basis points. This means Daniel Loeb’s investors outperformed Warren Buffett by around 7 percentage points per year. He may not be the nicest guy in New York, he may have a sharp tongue (see Dan Loeb’s letter to Citadel’s Ken Griffin), but he’s one of the best long/short hedge fund managers around.

what is a hedge fundDan Loeb’

Recently we covered Loeb’s best performing stock picks in 2011 based on what he shared in his investor letter. Now we have his 13F filing, which should give us some extra information about what Dan Loeb is up to. At the end of the fourth quarter, Dan Loeb had $1.8 Billion in stocks in his 13F portfolio. This figure was $1 Billion three months earlier. Here are the largest new stocks Third Point added to its 13F portfolio:

Company Ticker Return Value (Millions)
LYONDELLBASELL INDUSTRIES N LYB 7.8% 154
MASSEY ENERGY COMPANY MEE 17.6% 107
WILLIAMS COS INC DEL WMB 9.2% 99
LENDER PROCESSING SVCS INC LPS 10.5% 53
ABITIBIBOWATER INC ABH 24.6% 46
SMURFIT-STONE CONTAINER CORP SSCC 54.1% 38
SUNOCO INC SUN 6.4% 36
CITIGROUP INC C 3.2% 33
COMCAST CORP NEW CMCSA 9.7% 25
CVR ENERGY INC CVI 27.5% 24
RIO TINTO PLC RIO 3.6% 21
MARKET VECTORS ETF TR GDXJ -8.4% 18
YAHOO INC YHOO 1.3% 18
PALL CORP PLL 11.6% 17
ATLAS ENERGY INC ATLS 2.5% 11

LyondellBasell has been in Dan Loeb’s portfolio for a while now. It emerged from bankruptcy in April 2010. While in bankruptcy, its investors didn’t have to disclose their positions in it. Hedge funds finally had to report their holdings in that in fourth quarter’s 13F’s. Perry Capital’s Richard Perry just disclosed a new Massey Energy (MEE) position. Lender Processing Services (LPS) is one of the companies Whitney Tilson is shorting. This is the first time we see Whitney Tilson and Dan Loeb on the opposite sides of a trade. AbitibiBowater is attracting a lot of hedge fund interest; Richard Perry and Leon Copperman’s Omega Advisors have them in their portfolio as well. Dan Loeb says Bowater is a distressed company that recently emerged from bankruptcy and will soon be a post-reorganization equity. Smurfit-Stone (SSCC) is also attracting a lot of hedge fund interest right now. David Tepper and Barry Rosenstein are among these hedge funds. Citigroup (C) seems to be the hedge funds’ favorite TBTF bank stock. Richard Perry, Leon Cooperman, Zweig-DiMenna, Paulson & Co, and Brevan Howard have Citigroup in their portfolios. During the fourth quarter, Dan Loeb significantly increased his commodities bet (Jim Rogers explains bullish commodities view here). He increased his Gold ETF position by 50%, added Junior Gold Miners ETF (GDXJ), Palladium ETF (PALL), Platinum ETF (PPLT), and Rio Tinto (RIO).

At the end of 2010, Dan Loeb’s 15 largest positions in his 13F portfolio totaled $1.3 Billion. Here is a summary of their performance since then:

Company Ticker Return Value (Millions)
POTASH CORP SASK INC POT 21.7% 186
LYONDELLBASELL INDUSTRIES N LYB 7.8% 154
ALCON INC ACL 0.4% 131
MASSEY ENERGY COMPANY MEE 17.6% 107
WILLIAMS COS INC DEL WMB 9.2% 99
PHH CORP PHH 8.1% 81
HEALTH NET INC HNT 12.5% 76
CIT GROUP INC CIT 1.5% 73
NXP SEMICONDUCTORS N V NXPI 20.7% 66
LIBERTY MEDIA CORP NEW LINTA 5.6% 63
MEAD JOHNSON NUTRITION CO MJN -3.1% 62
LENDER PROCESSING SVCS INC LPS 10.5% 53
APPLE INC AAPL 10.6% 52
ABITIBIBOWATER INC ABH 24.6% 46
ASPEN TECHNOLOGY INC AZPN 21.8% 44

It seems like Dan Loeb’s strong performance is still going on strong. Eleven of these fifteen stocks beat the SPY by a large margin. The average return of these stocks was 11.2% since the end of December, vs. SPY’s 5.9%.  Dan Loeb was reducing his Depomed Inc (DEPO), and Nabi Biopharmaceuticals (NABI) positions. Dan Loeb also sold all of his Ligand Pharmaceuticals (LGND) and Northern Trust (NTRS) holdings. He didn’t make any changes in the following holdings: Abraxas Pete (AXAS), Madison Square Garden (MSG), Carefusion (CFN), KKR Financial (KFN), Biofuel Energy (BIOF), and Emmis Communications (EMMSP).

In separate 13G filings, Daniel Loeb also revealed a 5.36% position in Swift Transportation (SWFT) and 6.55% in Citadel Broadcasting Corp. Third Point has other positions, such as Accuride (ACW), that aren’t required to be reported to the SEC. We like Dan Loeb and we believe investors can outperform the market by imitating Dan Loeb’s top stock picks.

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