Billionaire Daniel Loeb’s Third Point opened about 16 new positions during the second quarter. Two of the new buys sit well outside the AI trade, and we decided to focus on those for this article.
Loeb’s fund bought 580,000 shares of Sysco Corporation (NYSE:SYY), a stake worth about $48.2 million and 1.03% of the portfolio. Sysco is a major foodservice distributor in North America.
Ares Management Corporation (NYSE:ARES) was another key addition in Third Point’s portfolio as the fund bought a stake worth about $41.7 million in the company. Ares is an alternative asset manager with businesses in credit, private equity, real estate and infrastructure.
Let’s analyze SYY in detail.
Sysco Corporation posted a 4.7% year-over-year increase in revenue in the fiscal fourth quarter reported in August amid volume increases. Sysco brand penetration reached 46.4% of total mix, a 30 basis point gain.
Sysco is growing existing accounts faster because its AI360 platform reads each customer’s purchasing patterns, spots products that customer probably needs but is not buying, and hands the salesperson a ranked list of the highest-value opportunities on that account.
For fiscal 2027, the company expects net sales growth of 6% to 7%. Bulls point to the company’s $29 billion acquisition of Jetro Restaurant Depot. Jetro is a cash-and-carry wholesaler that serves small independent restaurants and food businesses. The deal, if approved, would bring in about $16 billion in annual sales based on 2025 numbers.
Bear Case for SYY
Bears point to Sysco’s Jetro deal and question whether it will create enough long-term value to justify its size and financing burden. Sysco shares fell sharply when the acquisition was announced. Jetro shareholders are expected to own about 16% of Sysco after the deal through newly issued shares. Sysco’s total debt is also expected to rise to more than $36 billion. Although management plans to reduce leverage after the acquisition, debt levels are still expected to remain above the company’s long-term target for some time.
There are also integration risks. Jetro operates a cash-and-carry business aimed largely at independent restaurants and foodservice operators, while Sysco’s core model is based on large-scale food distribution. The businesses are related, but they operate differently, and Jetro is expected to retain its existing management.
At a broader level, Sysco remains exposed to inflation in food, labor and freight costs. The company does not have unlimited pricing power because customers can resist price increases, while the food-distribution industry has relatively low barriers to entry. Sysco also faces competition from large rivals such as U.S. Foods and Performance Food Group.
Valuation
The stock’s forward non-GAAP P/E stands at 16.06, about 14.3% below its own five-year average of 18.75, and trailing non-GAAP P/E of 17.74 sits 20.6% under its five-year average of 22.35. However, the forward multiple runs 4.5% above the sector median of 15.37, and trailing non-GAAP P/E runs 10.9% above the sector.
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