Below we present the list of Top 5 Stocks Billionaire Daniel Loeb Just Bought. For more background on Daniel Loeb and his hedge fund Third Point, as well as some of his other top new stock picks, don’t miss Top 10 Stocks Billionaire Daniel Loeb Just Bought.
- Expedia Group Inc (NASDAQ:EXPE)
Third Point bought over 1.62 million shares of Expedia Group Inc (NASDAQ:EXPE) during Q3, hoping to capitalize on the travel platform’s depressed stock price as a potential vaccine nears and global travel rebounds. That move paid off earlier this month when Pfizer Inc. (NYSE:PFE)’s announcement of just such a promising vaccine sent Expedia shares soaring by 20%.
Expedia has been devastated by the pandemic, as its 2020 revenue through September plummeted by 54% year-over-year to $4.23 billion, while gross bookings tumbled by 65%. The question now might be whether or not Expedia is overvalued again after its recent surge, which has pushed its stock above pre-Covid levels despite the travel industry still being decimated and Expedia have nearly doubled its debt load to over $8.17 billion this year.
- TransDigm Group Incorporated (NYSE:TDG)
Third Point owned 435,000 shares of TransDigm Group Incorporated (NYSE:TDG) at the end of Q3, opening a stake in the company valued at over $206 million on September 30. Hedge fund ownership of the aerospace company rose by over 50% between the end of 2017 and the middle of 2020 among the select group of high performing funds tracked by Insider Monkey.
Vulcan Value Partners discussed Transdigm in its Q2 2020 investor letter, highlighting the company’s wide moat over potential competitors and its strong free cash flow generation:
“TransDigm Group Inc. is an aerospace manufacturing firm that provides highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales. Most of its products are small volume, low cost items that are sole sourced from TransDigm. It is economically unlikely for a new company to compete on any particular product because volumes on individual components are not large enough to justify the investment in manufacturing facilities and regulatory approval. The company produces high levels of free cash flow, has long equity duration, a strong business model, and an effective, shareholder-oriented management team who are good capital allocators.”
- Fortive Corporation (NYSE:FTV)
Third Point bought just under 3.59 million shares of Fortive Corporation (NYSE:FTV) during Q3, building a position valued at over $228 million at the end of September. It’s not surprising to see Daniel Loeb take an interest in Fortive, as his hedge fund has been a major shareholder of Danaher Corporation (NYSE:DHR) dating back to 2015, a year before Fortive was spun off from that company.
In its Q1 investor letter, Brown Advisory expressed its concerns that Fortive may have difficulty spinning off some of its slower growth segments amid the pandemic market volatility. It took until September, but Fortive was finally able to do just that, announcing that it would spin off industrial technology segment Vontier, with Fortive shareholders being awarded 80.1% of Vontier’s common stock on September 25.
Third Point did not own a stake in Vontier Corp (NYSE:VNT) at the end of Q3, suggesting that the fund either bought its Fortive stake after September 25, or wasn’t interested in owning Vontier and sold off the VNT shares it was awarded on the aforementioned date.
- Microsoft Corporation (NASDAQ:MSFT)
Third Point has traded in and out of Microsoft Corporation (NASDAQ:MSFT) at multiple points over the past few years, selling off its most recent Microsoft position of 600,000 shares during the fourth quarter of 2019. Third Point is a Microsoft shareholder again after buying 1.1 million shares of the tech giant during Q3.
Microsoft ranked second on Insider Monkey’s list of the 30 Most Popular Stocks Among Hedge Funds in Q2, with 27% of the hedge funds we track being long MSFT shares. Microsoft has been one of the many tech companies to benefit from the shift to remote work in the pandemic era, which has provided a sizable boost to its cloud computing operations. Microsoft showcased impressive operational performance in its fiscal Q1 2021 results, topping estimates across all metrics as well as its own revenue guidance across all segments of the company. MSFT shares have gained 35% in 2020.
- PG&E Corp (NYSE:PCG)
Topping the list of Daniel Loeb’s newest stock buys is PG&E Corp (NYSE:PCG), which Third Point opened a massive position in during Q3, acquiring 84.94 million shares valued at over $797 million on September 30. The position is now the largest Third Point has in any stock and gives the fund a 4.2% ownership stake in the utilities company, which emerged from bankruptcy protection at the start of the third quarter.
While this is a new 13F portfolio position for Third Point, the fund has had involvement with the company dating back to late 2018, when PCG’s bonds began trading at distressed levels. Loeb discussed the company in his Q2 2020 investor letter and detailed the rationale behind supporting its reorganization efforts:
“We believed PG&E’s core business remained in a strong position reflecting a classic “good business/bad capital structure” restructuring and made it the firm’s largest distressed position. By early 2020, the company reached an agreement to restructure the business and as part of that exit plan, the company needed to raise approximately $26 billion in new capital including $9 billion in new common equity. The exit financing was used to settle insurance and victims’ claims relating to the 2017 and 2018 wildfires, repay some pre‐and post‐petition creditors, and contribute to the new Wildfire Fund.”
He further remarked on some of the company’s attractive fundamentals relative to its industry, including a valuation that was less than half that of its utilities sector peers, with PCG shares trading at just 8x expected 2022 earnings. Loeb expected that discount to its peers to diminish in time as PCG found a permanent CEO, built up its shareholder base, and ironed out its operational challenges. PCG shares have gained 28.5% since the end of June.
For more timely stock picks from the world’s most successful investors, don’t miss the Top 10 Stocks Billionaire Ray Dalio Just Bought.
Disclosure: None.
