Third Point 2019 Q3 Investor Letter

Third Point published its 2019 Q3 investor letter. You can download a copy below. The activist hedge fund returned 12.7% during the first three quarters of 2019, generating about 60% of S&P 500 Index’s return for the same period. Hedge funds are having a tough time beating a bull market and Third Point noticed this fact too. Dan Loeb sees activism as one of the most important selling points of his services (otherwise clients have a lot of incentives to switch to low cost index funds). Here is what he said:

Investing with an event‐driven approach by focusing on specific catalysts has been a core element of our process since our founding in 1995. Event‐driven techniques can be applied to both credit and equity investments and act as a valuable discipline when screening ideas and timing entry and exit points. As our engagement methods in governance have evolved, we have demonstrated the many ways in which our activist investing can generate alpha for our investors. Activism allows us to create our own catalyst in concentrated positions where, by definition, we have a differentiated view of a company’s potential value based on our intervention. After many years of doing this, we benefit from pattern recognition in finding and sourcing ideas that we believe have favorable risk/reward characteristics – heads we win, tails we don’t lose too much. Today, we are dedicating more time and capital to activism, which has become an even more valuable strategy in markets increasingly dominated by passive and quantitative players. The shift from active to passive holdings has been substantial and velocity is increasing, at the expense of active management.

Loeb provided an update about his Sony (SNE) campaign and shared a write-up about EssilorLuxottica (ESLOY). You can download a copy of the letter below:

Third Point Investor Letter Q3 2019