In this article we’ll take a closer look at the Top 10 Stocks Billionaire Daniel Loeb Just Bought. If you’re impatient to see the pinnacle of the list, you can skip ahead to the Top 5 Stocks Billionaire Daniel Loeb Just Bought.
Daniel Loeb’s Third Point is one of the most respected and successful activist hedge funds in the world. Loeb, who is the CEO and CIO of the fund, has built a net worth of $2.9 billion through his investing acumen according to Forbes, ranking him among the top 750 richest people in the world. His investment philosophy is built around uncovering stocks with looming catalysts that will unlock concealed value, as well as investing in distressed debt and special situation equities.
Since its inception in 1996, Third Point’s flagship Offshore Fund has delivered annualized returns of 14.2% through September 30, trouncing the 8.5% annualized total return of the S&P 500. After getting battered during the Q1 market collapse, the Offshore Fund has rebounded with gains of 10.8% in Q2 and 11.7% in Q3, pushing its year-to-date returns to 3.6%. Third Point managed $21 billion in assets under management as of June 2020.
In Daniel Loeb’s third quarter investor letter, a copy of which can be accessed here, he detailed his stock-picking approach during the quarter, citing a focus on “quality businesses with robust end markets, sustainable growth, technological edge, impenetrable market positions, strong cultures, and opportunities to reinvest capital at high rates of return.”
Third Point went on a buying spree during Q3, opening positions in 21 stocks while selling out of ten former positions. The value of its 13F portfolio holdings grew to $10 billion in the process from $7.30 billion at the end of June. The portfolio’s exposure to healthcare stocks continued to decline during Q3, while Loeb greatly increased his investments in utilities and telecommunications stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free enewsletter below to receive our stories in your inbox.
Now then, let’s check out the Top 10 Stocks Billionaire Daniel Loeb Just Bought, beginning with the lone IPO among them.
10. Goodrx Holdings Inc. (NASDAQ:GDRX)
Goodrx Holdings Inc. (NASDAQ:GDRX), which launched its IPO towards the end of Q3, kicks of our list, as Third Point snagged 500,000 shares during the offering. The drug pricing app company, which anticipated an upper range of $28 on its initial offering of shares, ended up selling close to 34.6 million shares at $33. Shares quickly surged by another 50% on the open market but have slipped back by 5% in the weeks since.
Goodrx’s healthcare platform allows customers to find discounts on drugs and medical treatments, and provides the company with multiple avenues to monetize those consumers, 15 million of which use the website/app each month. Goodrx more than doubled EPS estimates during Q3, delivering $0.21 per share. The company anticipates its fiscal 2020 revenue hitting $545 million, which would represent an increase of 40% year-over-year.
9. Planet Fitness Inc (NYSE:PLNT)
Daniel Loeb expects brighter days ahead for Planet Fitness Inc (NYSE:PLNT), brighter and no doubt vaccinated, as Third Point loaded up on PLNT shares in Q3, buying 772,200 of them. Planet Fitness has become steadily more popular over the past 4½ years among the select group of hedge funds tracked by Insider Monkey, with ownership of the stock increasing by 440% during that time. Nor has the pandemic scared off hedge funds, as ownership surged by 29% in Q1 and remained flat during Q2.
Planet Fitness has had a rough go of it during the pandemic, with many of its locations remaining closed for months on end and revenue per share declining by 41.78%. Things could’ve been worse however, as membership levels have only dropped by slightly more than 7% thanks in part to strong digital marketing initiatives. There’s other potential good news for Planet Fitness as well, in that while its franchisee model will allow it to weather the pandemic, other smaller gyms won’t be as lucky, creating an opportunity for the company to expand and gobble up market share following a vaccine’s arrival.
8. Caesars Entertainment, Inc. (NASDAQ:CZR)
Caesars Entertainment, Inc. (NASDAQ:CZR) looks like another new stock pick of Daniel Loeb’s that may have been bought with a potential near-term vaccine in mind. Third Point acquired an even 1 million CZR shares during Q3, building a position valued at $56.06 million on September 30. Hedge fund ownership of Caesar’s doubled in Q4 2017 among the funds tracked by Insider Monkey, but has fallen by 29% since then.
Caesar’s has reopened all but one of its physical locations and traffic has gradually been improving. A vaccine is undoubtedly needed for a complete resurgence to pre-pandemic levels however, particularly at destination locations, which have struggled more than regional locations this year.
Caesar’s CEO Anthony Rodio, who was pushed for the role by activist investor Carl Icahn, said during Caesar’s Q3 conference call that he expects tremendous demand for gambling and entertainment to be unleashed once a vaccine is available. Interestingly, Icahn sold out of Caesar’s during Q3, unloading his entire 114 million share position.
7. Avantor, Inc. (NYSE:AVTR)
Avantor, Inc. (NYSE:AVTR), which went public in the second quarter of 2019, was added to Third Point’s 13F portfolio in Q3 to the tune of 5 million shares valued at over $112 million on September 30. The producer of chemicals and laboratory products has had a number of notable hedge funds become committed shareholders since its IPO, including Andreas Halvorsen’s Viking Global and Ken Griffin’s Citadel Investment.
Avantor is coming off a solid Q3 during which it pulled in $1.61 billion in revenue and adjusted earnings per share of $0.24, both figures topping estimates. More intriguing perhaps to Third Point is the company’s potential in the Covid vaccine space, as Avantor has been included in more than 200 vaccine trials, which could greatly boost the output of its high-margin bioprocessing unit.
6. Pinterest, Inc. (NYSE:PINS)
The first-half of our list of the top 10 stocks bought by billionaire Daniel Loeb during Q3 wraps up with Pinterest, Inc. (NYSE:PINS), one of the best performing stocks of 2020. Third Point bought 3.58 million shares of the social media platform during Q3, valued at nearly $149 million at the end of the quarter.
PINS shares have gained a remarkable 231% this year, with the bulk of those gains coming over the last three-and-a-half months. Pinterest has been one of the big winners of the lockdown, growing its monthly active users by 37% in Q3 and its revenue by 58% on a year-over-year basis. Pinterest is expecting an even better showing in Q4, predicting a 60% year-over-year surge in revenue.
Click to finish the countdown and see the Top 5 Stocks Billionaire Daniel Loeb Just Bought. Disclosure: None. Top 10 Stocks Billionaire Daniel Loeb Just Bought is originally published at Insider Monkey.