In this article, we will discuss the 9 stocks billionaire Dan Loeb is adding to his portfolio.
Daniel Seth Loeb is an American investor, philanthropist, and the founder and CEO of the New York-based hedge fund, Third Point. He is the son of Ronald Loeb, who was a lawyer and general counsel at Williams-Sonoma, Inc. (NYSE:WSM).
Loeb’s Investment Philosophy
According to Loeb, he became fascinated with investing at the age of 5 or 6. Loeb’s main inspiration was his aunt Ruth Handler, the creator of the Barbie Doll. Loeb said:
“I associated success in business with Hot Wheels and Barbie dolls. I think it was a very powerful enforcer early on to like business.”
Dan Loeb had already made around $120,000 in profits from investments during his time at Columbia University, which he later lost in a bad investment. According to Loeb, this bad investment taught him about the complication of “over concentrating positions.” According to the New York Magazine, Loeb’s key to success is that he believes in buying troubled companies and replacing their incompetent management to get the company back on its feet and return it to profitability.
Daniel Loeb has been known to write angry letters to companies where he believes that the executives are greedy and affecting the shareholder returns. One of these letters was the reason Yahoo’s CEO, Scott Thompson, had to step down from his position. At that time, Loeb’s Third Point had a 5.8% stake in the company.
Third Point LLC
Third Point LLC was founded by Daniel Loeb in 1995 with $3.3 million he collected from his family and friends. As of the first quarter of 2022, the annual return of Third Point since its inception stood at 14.3%. According to the Q1 filings, the fund manages approximately $16 billion in assets for sovereign wealth funds, endowments, foundations, corporate & public pensions, high net-worth individuals, and employees.
Third Point focuses its investments on private equities, fixed income, and American depositary receipt markets. The firm has 6 additional offices apart from its headquarters in New York, including offices in Hong Kong, India, and London. It is also the investment manager of Third Point Partners Qualified L.P., Third Point Partners L.P., Third Point Offshore Master Fund L.P., and Third Point Ultra Master Fund L.P.
According to Q1 13F filings, Third Point had $7.68 billion in managed 13F securities. The fund made 9 new purchases in the quarter and sold out 26 stocks. Furthermore, the firm reduced its holdings in 22 stocks while making additional purchases in 5.
SentinelOne, Inc. (NYSE:S), PG&E Corporation (NYSE:PCG), and Danaher Corporation (NYSE:DHR) are some of the most notable names in Third Point’s portfolio. In this article, we will discuss the fund’s new purchases.
Dan Loeb of Third Point
Our Methodology
These stocks were picked from the first quarter 2022 13F portfolio of Third Point LLC. All the stocks in the list were added to the fund’s portfolio in the first quarter of 2022.
The hedge fund sentiment around each stock was taken from Insider Monkey’s Q1 database of 900+ elite hedge funds.
Billionaire Dan Loeb is Adding These Stocks in his Portfolio
9. Adagio Therapeutics, Inc. (NASDAQ:ADGI)
Third Point’s Stake Value: $4.5 million
Percentage of Third Point’s 13F Portfolio: 0.05%
Number of Hedge Fund Holders: 9
Adagio Therapeutics, Inc. (NASDAQ:ADGI) is a US-based clinical-stage biopharmaceutical company. The company’s primary focus is on developing and commercializing antibody-based solutions for infectious diseases. The company was added to Third Point’s portfolio in the first quarter of 2022 with 987,114 shares worth $4.5 million, representing 0.05% of the fund’s portfolio.
As of July 19, Adagio Therapeutics, Inc. stock has surged 32.43% during the past 30 days. The company’s last reported cash and cash equivalents were around $532.2 million. The assets were valued at $556.3 million while the liabilities were around $96.9 million.
As of the first quarter of 2022, 9 hedge funds had a stake worth $64.6 million in Adagio Therapeutics, Inc.. OrbiMed Advisors was the most significant stakeholder in the company with shares valued at $23.055 million.
On May 13, Stifel analyst Stephen Willey told the investors that his confidence in Adagio Therapeutics, Inc.’s FY2022 estimates and visibility into the company’s ADG20’s path forward remains “significantly limited”. The analyst lowered the firm’s price target from $9 to $5 and maintained a Hold rating on its shares.
SentinelOne, Inc., PG&E Corporation, and Danaher Corporation are some of the significant names along with Adagio Therapeutics, Inc. in Dan Loeb’s portfolio.
8. Western Digital Corporation (NASDAQ:WDC)
Third Point’s Stake Value: $7.27 million
Percentage of Third Point’s 13F Portfolio: 0.09%
Number of Hedge Fund Holders: 45
Western Digital Corporation (NASDAQ:WDC) is primarily a computer hard disk drive manufacturer. Moreover, it also produces and sells SSDs, flash memory devices, data center systems, and cloud storage services. According to Third Point’s 13F filings, the fund owned 72,450 shares of Western Digital Corporation worth $7.27 million at the end of Q1 2022.
On July 15, Deutsche Bank analyst Sidney Ho maintained a Buy rating on Western Digital Corporation. However, the analyst lowered the firm’s price target to $64 from $72. According to Ho, the weaker flash demand and prices have been the main reason behind the price target revision.
At the end of Q1 2022, Lyrical Asset Management was the most significant shareholder in Western Digital Corporation, with a stake value of $204.09 million. In addition, several hedge funds increased their holdings in the company in the same quarter. Citadel Investment Group increased its activity in the company by 2351%, followed by GLG Partners with an increase of 1468%, and Renaissance Technologies by 446%.
7. Cenovus Energy Inc. (NYSE:CVE)
Third Point’s Stake Value: $33.36 million
Percentage of Third Point’s 13F Portfolio: 0.43%
Number of Hedge Fund Holders: 44
Cenovus Energy Inc. (NYSE:CVE) is Canada’s third-largest crude oil and natural gas producer and the second-largest refiner and upgrader. In January 2021, the company acquired Husky Energy, a Canadian hydrocarbon exploration firm, for C$3.9 billion in stock. On June 18, National Bank analyst Travis Wood lowered his price target on Cenovus Energy Inc. to $38 from $41 and reiterated an Outperform rating on its shares.
As of June 30, the LTM revenues of Cenovus Energy Inc. were reported at $42.6 billion, representing a 269.2% growth from 2019 levels. Moreover, gross margins of 23.6% represented a 1.8 percentage point increase from 2019 levels. During the same period, the company’s net income was reported at $1.59 billion, and free cash flows stood at $3.43 billion.
Cenovus Energy Inc. has a dividend yield of 2.04%. In March 2020, the quarterly dividend payout of the company was $0.047. However, the next dividend was paid out in September 2020 at a meager sum of $0.014. Nonetheless, the most recent quarterly dividend of $0.083 was paid out on June 30 to the shareholders of record on June 14.
Here is what L1 Capital said about Cenovus Energy Inc. in its fourth-quarter 2021 investor letter:
“Detailed, bottom-up stock research remains the investment team’s primary focus and the core driver of portfolio performance. 2021 once again demonstrated the team’s ability to identify ‘winners’ through extensive company and industry research across a diverse range of sectors. Key contributors included Cenovus Energy, (due to) recovering oil price leading to improved investor sentiment, consensus earnings upgrades and strong free cash flow generation.”
6. Ingersoll Rand Inc. (NYSE:IR)
Third Point’s Stake Value: $76.78 million
Percentage of Third Point’s 13F Portfolio: 0.99%
Number of Hedge Fund Holders: 31
Ingersoll Rand Inc. (NYSE:IR) provides flow creation products such as compressors, vacuum, and blower solutions, in addition to other industrial products. The company sells its products in 160 countries under more than 40 brands. Insider Monkey’s database reveals that 31 hedge funds were bullish on Ingersoll Rand Inc. with a total value of $815.2 million.
At the end of the first quarter of 2022, Ingersoll Rand Inc.’s liquidity position was valued at $3.1 billion. It included $2 billion in cash along with a revolving credit facility of $1.1 billion. Furthermore, the company’s sales increased by 18% YoY and adjusted EBITDA represented a surge of 24% YoY. As of June 30, Ingersoll Rand Inc.’s free cash flow was recorded at $471.5 million.
In the first quarter of 2022, Ingersoll Rand Inc. paid out $8.2 million in dividends and made $101.1 million of repurchases. Currently, the company’s dividend yield stands at 0.2% with an annual payout of $0.08.
On July 15, Jefferies analyst Stephen Volkmann lowered Ingersoll Rand Inc.’s price target from $60 to $55 and maintained a Buy rating on its shares. The analyst lowered his price target as he believes that companies are looking for earning cuts in the upcoming couple of years. However, he expects most of the machinery companies to be in line with or exceed the analyst estimates.
Ingersoll Rand Inc. is a noteworthy name in Dan Loeb’s portfolio along with SentinelOne, Inc., PG&E Corporation, and Danaher Corporation.
Artisan Partners mentioned Ingersoll Rand Inc. in its fourth-quarter 2021 investor letter. Here is what the firm said:
“Ingersoll Rand is a global market leader with a broad range of mission critical flow creation technologies (pumps, compressors, etc.) for industrial and medical applications. The company’s recent Q3 results were solid and support our belief it is making the right investments in R&D and acquisitions to elevate its sustainable revenue growth rate. We have been particularly encouraged by the important role IR’s products can play in reducing the greenhouse gas intensity of manufacturing facilities. With an increasingly visible organic and acquisition-driven growth capability and further margin upside from the Gardner Denver merger, we added to our position as the market appears to be underappreciating the transformation underway at the company.”
5. The Mosaic Company (NYSE:MOS)
Third Point’s Stake Value: $85.12 million
Percentage of Third Point’s 13F Portfolio: 1.1%
Number of Hedge Fund Holders: 66
The Mosaic Company (NYSE:MOS) is a Florida-based agriculture and fertilizer company. As of 2022, it ranks 305th on the Fortune 500 list. The company is currently the largest producer of potash and phosphate fertilizer in the United States. On top of that, The Mosaic Company produces around 12% of the world’s phosphate and potash supply.
In the first quarter of 2022, The Mosaic Company reported missing EPS and revenue estimates by 0.25% and 3.09%, respectively. Nonetheless, for FY2022, the company expects a free cash flow of $3.7 billion and $7.7 billion in EBITDA. In addition, the company is planning to expand its production by the second half of 2023.
On July 14, Credit Suisse analyst John Roberts initiated coverage of The Mosaic Company with a $60 price target and an Outperform rating on its shares. According to Roberts, more than 50% of the company’s sales are in Brazil, which is the fastest growing large fertilizer market.
Here is what Carillon Tower Advisers had to say about The Mosaic Company in its Q1 2022 investor letter:
“Despite a rally near the end of the quarter, major equity indexes closed lower as fear of U.S. Federal Reserve (FED) balance sheet tapering, interest rate hikes, and war in the Ukraine sent the bulls into retreat. Supply chains eased for some goods, but remained challenged for many commodities including energy, agriculture, and fertilizer due to war and general scarcity, and also in many consumer products as semiconductors remained in short supply. Potash and phosphate fertilizer producer Mosaic performed strongly as war exacerbated already short supplies of key oil and gas exploration.”
4. Suncor Energy Inc. (NYSE:SU)
Third Point’s Stake Value: $114.12 million
Percentage of Third Point’s 13F Portfolio: 1.48%
Number of Hedge Fund Holders: 41
Suncor Energy Inc. (NYSE:SU) is a Canadian oil and gas company. It produces synthetic crude from the world’s largest crude oil deposit situated in the Canadian oil sands. In the first quarter of 2022, Suncor Energy Inc. was part of 41 hedge fund portfolios with a combined value of $2.07 billion.
According to the most recent reports, Suncor Energy Inc. has over $3.1 billion worth of liquid assets, which include close to $1.6 billion in cash and cash equivalents. In Q1 2022, the company reduced its net debt to approximately $11.6 billion and plans to reduce it even further to roughly $9.3 billion by the second half of FY2022. In the first quarter, the company returned close to $1.43 billion to its shareholders in the form of dividends and share buybacks.
On July 18, National Bank analyst Travis Wood lowered Suncor Energy Inc.’s price target to $64 from $73 and maintained a Sector Perform rating on the company shares.
ClearBridge Investments mentioned Suncor Energy Inc. in its first-quarter 2022 investor letter. Here is what the firm said:
“Also within the structural bucket, we added to our commodity exposure with the purchase of Suncor Energy. Suncor, a past holding, is a Canadian integrated oil company where we capitalized on attractive valuation due to a COVID-19-induced slowdown. We expect recovery in oil demand and strong pricing will result in faster than expected free cash flow growth and financial deleveraging.
The structural bucket has the shortest investment horizon across the spectrum of growth companies we target in the Strategy. We closely monitor the macro impacts and turnaround progress of these companies and will be disciplined sellers when the thesis for a holding plays out.”
3. Ovintiv Inc. (NYSE:OVV)
Third Point’s Stake Value: $121.658 million
Percentage of Third Point’s 13F Portfolio: 1.58%
Number of Hedge Fund Holders: 44
Ovintiv Inc. (NYSE:OVV) is an American hydrocarbon exploration company headquartered in Denver. In 2021, the company’s average petroleum, natural gas liquids, and natural gas production was around 533.9 thousand BOE per day. Furthermore, the company owns approximately 1.3 million net acres of land in Canada and close to 929,000 net acres of land in the United States.
On May 9, Ovintiv Inc. announced its second dividend raise in six months. Previously, the company increased its quarterly dividend from $0.14 to $0.20 in March. The most recent quarterly dividend of $0.25 was paid out on June 30 to the shareholders of record on June 14. As of July 21, the company has a dividend yield of 2.20%.
On July 19, BofA analyst Doug Leggate upgraded Ovintiv Inc.’s shares to Buy from Hold. However, the analyst reduced his price target for the firm to $60 from $65. The analyst added that he sees justifications for defensive positioning in the US oils.
Here is what Miller Value Partners said about Ovintiv Inc. in its fourth-quarter 2022 investor letter:
“The outlook for high multiple favorites depends to a great degree on interest rates. Warren Buffett likened interest rates to the force of gravity for asset prices. At current low levels, high valuations on long-duration assets can be justified. If interest rates move up, the adjustment will be painful. Market action early in the new year, with the swift moves up in interest rates and down in the Nasdaq, offers a taste of the medicine.
We underwrite all our names to have sufficient upside even if risk-free rates move up to 3% (a scenario, not a forecast!). As we evaluate the opportunity set, we find more attractive prospects in the classic value names. We often hear that people think value investing is dead, which only strengthens our conviction. Our gross exposure to classic value has risen from 44% a year ago to 62% currently.
One new name that illustrates the potential we see is Ovintiv (OVV), an oil and gas producer. We’ve seen a huge shift in the industry away from growth towards returns on capital, cash generation, and capacity discipline. OVV exemplifies the change.
OVV’s new CEO Brendan McCracken says: “We are at the forefront of driving innovation to produce oil and gas from shale both profitably and sustainably. We will generate superior returns and free cash flow by continuously improving capital efficiency and expanding margins while driving down emissions. We will deliver that value to our shareholders through disciplined capital allocation.”
Based on crude at $65 (well below the current $83.82 as of 1/14/22), the company guides to free cash flow generation of $11B over the next 5 years and $21B in the next 10 years. The company’s market cap is currently $10B and its enterprise value is $16B. It’s returning a significant portion of the capital to shareholders. If crude averages $70 in 2022, the company will return $700M to shareholders (in addition to paying down a significant amount of debt), which implies a yield of 7% at the current $39.53 price. In other words, there’s a good shot the company will return nearly its entire market cap to shareholders over the next 5 years.”
2. Alcoa Corporation (NYSE:AA)
Third Point’s Stake Value: $213.8 million
Percentage of Third Point’s 13F Portfolio: 2.78%
Number of Hedge Fund Holders: 50
Alcoa Corporation (NYSE:AA) is the world’s eighth-largest aluminum producer and operates in 10 countries. In the first quarter of 2022, 50 out of the 912 hedge funds tracked by Insider Monkey were bullish on Alcoa Corporation, up from 41 in the previous quarter.
According to Alcoa Corporation’s Q1 reports, the company’s non-GAAP adjusted EPS surged by 22% compared to the previous quarter and YoY growth was recorded at 287%. The main catalyst behind it was the price surge in aluminum from $2.3 billion per metric tonne to $3.68 billion. The company’s proportional net debt was around $1.3 billion. However, Alcoa Corporation expects to generate over $4 billion of EBITDA at the end of FY 2022. Furthermore, the company has no debt maturities till 2027.
Credit Suisse analyst Curt Woodworth expects a weaker Q2 performance by the company and lowered the firm’s price target to $63 from $82, maintaining a Neutral rating on its shares on July 19. The analyst also expects a weaker result in the third quarter, insinuating a successive decline in EBITDA due to lower alumina/aluminum average selling price.
1. CSX Corporation (NASDAQ:CSX)
Third Point’s Stake Value: $213.8 million
Percentage of Third Point’s 13F Portfolio: 2.78%
Number of Hedge Fund Holders: 50
CSX Corporation (NASDAQ:CSX) is an American rail transportation holding company. The company operates over a 19000-mile rail network and owns close to 3500 locomotives. Apart from that, the company also deals in real estate.
In the past decade, CSX Corporation’s dividend payout leaped by 114%, and the company bought back 30% of its shares. Nearly $4 billion worth of shares were bought back in 2021. The company has a dividend yield of 1.29% with a quarterly dividend of $0.10.
Hedge funds were loading up on CSX Corporation stock in the first quarter of 2022. According to the Insider Monkey database, 72 hedge funds had stakes worth $6.3 billion in the company, compared to 56 hedge funds in the previous quarter with a combined stake value of $5.3 billion.
Here is what ClearBridge investments had to say about CSX Corporation in its Q4 2021 investor letter:
“On a regional basis, the U.S. and Canada was the top contributor to quarterly performance, of which U.S. rail operators CSX was among the lead performers. CSX is one of five leading North American rail companies, with over 21,000 miles of rail, covering 23 states and 40+ ports. CSX is engaged in the transportation of rail freight in the Southeast, East, and Midwest via interchange with other rail carriers, to and from the rest of the U.S. and Canada. CSX performed well during the quarter after the company beats market expectations on its third-quarter results. The beats were largely driven by strong pricing, which could be hitting record highs, and healthy commodity/coal volume driven by the current energy crisis.”
You can also take a look at 10 Blue Chip Stocks to Buy Now According to Billionaire Andreas Halvorsen and Michael Hintze’s 2022 Portfolio : Top 10 Stock Picks.
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This article is originally published at Insider Monkey.
