Dover Corp (DOV), DowDuPont Inc (DWDP) & More: Billionaire Dan Loeb’s Third Point Q3 Letter and Portfolio Updates

Page 1 of 3

As many hedge funds have been struggling to keep up with the market that has been registering record highs what seems like every day, activist investors have been in the spotlight more frequently than ever. Activists don’t just follow the market and invest in stocks that usually tend to go with the flow, but identify companies that have intrinsic value and the underlying causes of their underperformance on the stock market. This allows activists to urge companies to change their business models, replace key executives, and execute other actions that unlock shareholder value and propel the stock higher.

One activist fund that has been pretty successful this year is Third Point, led by billionaire Dan Loeb. Third Point’s Offshore Fund gained 3.4% in the third-quarter, while its Ultra Fund registered a 4.9% return, according to the fund’s third-quarter letter to investors. These earnings were driven by the strong performance of Alibaba Group Holding Ltd (NYSE:BABA)Baxter International Inc (NYSE:BAX)DowDuPont Inc (NYSE:DWDP)Facebook Inc (NASDAQ:FB), and Honeywell International Inc. (NYSE:HON), which represented Third Point’s biggest winners of the quarter. At the same time, NestleSothebys (NYSE:BID)Vulcan Materials Company (NYSE:VMC), as well as an undisclosed short bet and a position in asset-backed securities, also undisclosed, offset Third Point’s performance and counted among the fund’s largest losers.

Third-quarter performance brought Third Point’s Offshore and Ultra funds’ year-to-date returns to 14.5% and 23%, respectively. In this way, since inception, Third Point Offshore has posted an annualized return of 15.8%, while Third Point Ultra’s return amounted to 23.7%.

Third Point 2014 Q3 Investor Letter

Dan Loeb’s fund remains bullish on the stock market, as it expects that promised deregulation will make it easier for companies to operate, while the tax reform that the new White House administration is currently working on should help the U.S stock market to continue its growth, also helped by strong consumer and business confidence combined with synchronized global growth. The fund also pointed out that the weaker US dollar and the Fed’s decision to hold off on raising interest rates last year helped to improve global financial conditions, which aided growth. Moreover, stock markets around the world have gained more ground, helped by earnings.

Third Point is especially bullish on U.S stocks, which it believes should continue to appreciate on the back of strong earnings expectations, which in turn, are driven by global GDP growth and potential tax cuts. The fund anticipates that the S&P 500 companies will see their earnings increase by 12% in 2018. The letter added that Third Point also has increased its exposure to European markets, mainly through initiating a stake in Nestle SA (ADR) (OTCMKTS:NSRGY) in June.

Dan Loeb’s Third Point is one of over 600 investors that we track at Insider Monkey. Given that it’s an activist fund, Third Point often files updates with the Securities and Exchange Commission regarding its investments and in many cases these updates can help move a stock higher or lower. To stay on top of things, you can follow Third Point on our website and receive real-time alerts to your email whenever Third Point files a 13D disclosing a new position, amends an existing holding (or provides updates regarding its activist campaign), or discloses its quarterly 13F portfolio. To do that, you should subscribe to Insider Monkey and add Third Point to your follow list.

Having said that, on the next page we’ll take a closer look at Third Point’s commentary regarding its new investment, Dover Corp (NYSE:DOV), as well as see some updates regarding three activist positions of the fund.

Page 1 of 3