Billionaire Daniel Loeb has over $4 billion of AUM and founded his New York-based hedge fund Third Point Management in 1995 with just over $3 million. Loeb graduated from Columbia University in 1983 and worked at Jefferies & Company and Citibank before starting Third Point. Loeb is considered an activist investor that takes out-sized positions in his investments. In reviewing Loeb’s latest 13F filing with the SEC, we found five stocks his fund sold off last quarter (check out Dan Loeb’s newest picks).
Aetna Inc. (NYSE:AET) is a diversified healthcare benefits company that is expected to see revenues up 9% in 2013. Main revenue drivers include the expansion of Medicaid and contract victories. Also helping drive longer-term growth is the acquisition of Coventry Health, which will increase Aetna’s geographic presence in the Medicaid and Medicare markets. The healthcare company expects Coventry to add $0.45 and $0.90 to EPS in 2014 and 2015, respectively. With a healthy cash position of over $600 million, Aetna should manage to continue paying its 1.75% dividend yield – a $270 million total dividend payout. We believe the selloff could have been Loeb taking some profits, as the healthcare stock is up 20% over the last six months. Billionaire David Einhorn is still one of Aetna’s big backers with over 4 million shares invested (check out David Einhorn’s key picks).
Advance Auto Parts, Inc. (NYSE:AAP) is the auto parts retailer that has reportedly been exploring the sale of itself to private equity firms. Notable competitor Pep Boys was up 30% earlier this year on reports of a private equity buyout, but later tumbled when the PE firm pulled out of the deal. Advance is expected to see sales up 4% in 2013 on the back of a net increase in 150 stores. Helping drive the revenue growth for Advance will be the aging of vehicles and challenging economic conditions limiting the purchase of new cars. Advance still trades well below its peers on a P/E basis at 13x, compared to Pep Boys (22x), O’Reilly (19x) and AutoZone (14x). Billionaire Jim Simons upped his stake in Advance by 30% last quarter (check out Jim Simons’ top picks).
News Corp (NASDAQ:NWSA) is one of the most loved media stocks by hedge funds and is trading at the high end of the industry. The media company trades at 23x earnings, compared to Disney at 16x and Comcast at 17x. Revenues are expected to be up 2% in FY2013 and 4.4% in FY2014 thanks to growth in advertising revenues. The key factor that pushed the stock up close to 35% in 2012 is the expected breakup of News Corp into separate entertainment and publishing companies. The entertainment business should provide solid revenue via digital content. Ken Griffin – founder of Citadel Investment Group – is one of News Corp’s top-name investors (check out Ken Griffin’s newest picks).
The other two are…
Dish Network Corp. (NASDAQ:DISH) lost a total of 165,000 subscribers in 2011 and expects to see a flat subscriber base in 2012 and 2013 at around 14 million. The company’s core TV business is still holding up operations – including its DVR and streaming video segments. A likely drag on Dish is its Blockbuster integration, and acquisitions of DBSD and TerreStar. Dish trades on the high end of the industry at 22x earnings, compared to Time Warner (14x) and Comcast (17x). Interestingly, the sell-side forecasts Dish to experience a 5-year EPS growth rate of only 2% annually.
Capital One Financial Corp. (NYSE:COF) is one of the top-notch credit card companies and was up close to 35% in 2012. Growth in domestic credit card purchase volumes has been positive, but recent acquisitions could be a drag over the interim – including those of the ING Direct and HSBC’s U.S. card portfolio. Although this might bring the card company’s valuation into question, we see the fact that broader economic trends are showing signs of improvement, which will translate into loan loss provisions and charge-offs declining in 2013. Even with the strong performance by Capital One, it still trades at a P/S of only 1.4x, versus Discover at 2.4x and American Express at 1.9x. John Paulson is a big-name investor in Capital One (see John Paulson’s newest picks).
Dan Loeb’s selloffs were in a variety of industries, some of which we believe still have upside potential. Aetna should see positive growth from a steady rise in population. We agree the retail market might be limited, including the market for auto parts. Meanwhile, the valuation for Dish might be overdone and the News Corp breakup might already be baked into the stock. Capital One could still see upside given its strong market position. Here’s some more related coverage: