Billionaire Dan Loeb’s Top Long-Term Holdings

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.

#3 Sothebys (NYSE:BID)

 – Shares Owned by Third Point (as of December 31): 6.65 Million

 – Value of Holding (as of December 31): $171.3 Million

Third Point has had an activist stake in the $1.6 billion auction house operator since the first quarter of 2013 and holds three seats on the company’s board. According to a recent Form 4 filing, Third Point further inched up its stake in Sothebys by acquiring 10,000 shares for $21.93 per share on February 29. Although up by 2.6% so far this year, Sothebys (NYSE:BID)’s stock is trading down by almost 37% over the last 12 months. CEO Tad Smith joined the company last year and has been focused on making a turnaround, but a weak art market and economic slowdown in Asia have made the going tough for him. The company posted a fourth quarter loss of $11.2 million while sales were down by 33% in 2015. Richard McGuire‘s Marcato Capital Management trimmed its stake in Sothebys (NYSE:BID) by 6% during the fourth trimester to 6.22 million shares.

#2 Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK)

 – Shares Owned by Third Point (as of December 31): 5 Million

 – Value of Holding (as of December 31): $203.85 Million

The leading international cable company recently announced its merger with Vodafone, with whom it plans to engage in the Netherlands with a more well-rounded portfolio of products. Moreover, Liberty’s fourth quarter revenue of $4.6 billion beat analyst estimates by $90 million as the company managed to add 344,000 revenue generating units during this period, the highest for any quarter last year. Mr. Loeb added the company to his fund’s portfolio in the second quarter of 2012 and the stock is down by about 9.5% since the stock was split in March of 2014. Eagle Capital Management, which is led by Boykin Curry, holds about 32.79 million shares of Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) after hiking its stake by 9% in the October-to-December period.

#1 Constellation Brands, Inc. (NYSE:STZ)

 – Shares Owned by Trian Partners (as of December 31): 1.6 Million

 – Value of Holding (as of December 31): $227.90 Million

Loeb initiated a position in Constellation Brands, Inc. (NYSE:STZ) during the second quarter of 2012 and trimmed his stake in the company by 8% during the fourth quarter. After a sharp fall in early February, shares of the $31 billion international alcohol company have recovered and trade up by 7.2% on a year-to-date basis. The company is facing supply chain issues as it issued another recall of Corona over fears that a small percentage of shipped bottles may contain glass particles. According to analysts, the company needs to reduce its dependency on Anheuser-Busch InBev, the brewery behind the manufacturing of the recalled beers, and ramp up production at its brewery in Nava. Stephen Mandel‘s Lone Pine Capital upped its stake in Constellation Brands, Inc. (NYSE:STZ) by 15% to 5.35 million shares during the fourth quarter.

Dsiclosure: None