Activist hedge fund manager Dan Loeb might not have broken any records in 2015 when his fund Third Point delivered a loss of 1% for the year, but the figures were much better than other prominent players in the industry, many of whom took a serious beating. Third Point has yet to rebound in 2016, being down by 1.9% for the year, though it did enjoy a strong March, posting gains of 3.2%. In this article we’ll take a look at the fund’s conviction picks (its long-term equity holdings) and see if they can provide a strong long-term foundation for the portfolios of retail investors as well.
Our research at Insider Monkey determined that following the small-cap stocks, that hedge funds are collectively bullish on, can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).
#5 Enphase Energy Inc (NASDAQ:ENPH)
– Shares Owned by Third Point (as of December 31): 6.25 Million
– Value of Holding (as of December 31): $21.93 Million
Loeb’s long-term bet on the $113 million manufacturer of microinverter systems for the solar photovoltaic (PV) industry has been taking a serious beating lately, as the stock is down by 82% over the last 12 months and by about 71% since the second quarter of 2012 when Third Point initiated its position in the company. Investors like Cliff Asness of AQR Capital Management and Israel Englander of Millennium Management saw this slide as a buying opportunity and massively ramped up their Enphase Energy Inc (NASDAQ:ENPH) holdings during the fourth quarter, to about 820,500 shares and 317,400 shares respectively. The slump in oil prices and increased competition in the solar industry owing to the sharp decline in the cost to produce electricity from solar sources has wrecked havoc with the valuations of companies operating in the sector. Enphase Energy Inc (NASDAQ:ENPH) not only missed the top and bottom line estimates with its financial results for the fourth quarter, it also provided rather soft guidance for the first quarter of this year.
#4 Green Brick Partners Inc (NASDAQ:GRBK)
– Shares Owned by Third Point (as of December 31): 8.08 Million
– Value of Holding (as of December 31): $58.20 Million
The $357 million real estate operator has been in Third Point’s portfolio since the second quarter of 2007, with the holding currently constituting about 16.5% of Green Brick Partners Inc (NASDAQ:GRBK)’s outstanding stock. Green Brick beat both the top and bottom line estimates with its fourth quarter financial results and shares are up by about 3.5% so far this year. James Brickman, Green Brick’s CEO, expects his company’s performance to improve even further during the current fiscal year. David Einhorn‘s Greenlight Capital is the largest stockholder of Green Brick Partners Inc (NASDAQ:GRBK) in our system, holding nearly 24.12 million shares.
The following page discusses Third Point’s top three long-term holdings.