We track quarterly 13F filings from hundreds of hedge funds and other notable investors, including billionaire Dan Loeb’s Third Point. By processing these filings in our database, we’ve shown that it’s possible to develop investment strategies based on the included information; for example, the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year. We can also screen filings from top managers according to a number of criteria, including the traditional value metrics of low earnings multiples. Read on for our quick take on Loeb’s five largest holdings in stocks with both trailing and forward P/Es of 13 or lower (or see the full list of stocks Third Point reported owning).
The fund cut its stake in Murphy Oil Corporation (NYSE:MUR), but the oil and gas company was still one of Loeb’s ten largest 13F holdings by market value at a position of 2.5 million shares. Murphy carries trailing and forward P/Es of 12 and 10, respectively, which is more or less in line with where many larger oil majors are trading. There is something of a premium here as investors expect the company to create vale by spinning out its retail and marketing operations; spinouts allow management to better focus on improving each segment’s operations rather than dealing with the needs of the entire organization. Learn more about investing in spinouts.
Third Point purchased 1 million shares of Hess Corp. (NYSE:HES) between January and March. Hess Corp. (NYSE:HES) has announced plans to spin out its downstream operations as well, possibly after being prodded into doing so by billionaire Paul Singer’s Elliott Management; that fund had owned 15 million shares according to its own 13F (find Singer’s favorite stocks). Wall Street analysts project that the company will generate $5.91 in earnings per share next year, implying a forward earnings multiple of 11. In absolute terms that’s certainly in value territory, with some potential for the company to improve from being more focused on core operations.
The filing showed Loeb and his team with 950,000 shares of LyondellBasell Industries NV (NYSE:LYB) in their portfolio after cutting their stake in the chemicals company during Q1. Lyondellbasell’s beta is 2.5, reflecting how sensitive the demand for chemicals is on broader economic conditions. The chemicals industry, like agriculture and oil and gas, is home to a number of candidates for value status and Lyondellbasell is no exception with a trailing P/E of 13. We would note that sales have been down going by recent reports, however. Viking Global, managed by billionaire Andreas Halvorsen, was another major shareholder in the stock (research more stocks Viking Global owns).
Disclosure: I own no shares of any stocks mentioned in this article.
