"Tracking Dan Loeb’s Third Point Portfolio – Q4 2017 Update"
"Dan Loeb's 13F portfolio value increased from $11.90B to $13.86B this quarter. The number of positions increased from 37 to 44.Third Point increased Alphabet and Time Warner while dropping Bank of America and T-Mobile US.The top three positions are Baxter International, DowDuPont, and Alibaba Group Holdings. Together, they are at ~32% of the portfolio.This article is part of a series that provides an ongoing analysis of the changes made to Dan Loeb’s US stock portfolio on a quarterly basis. It is based on Third Point’s regulatory  filed on 02/14/2018. Please visit our  to get an idea of his investment philosophy and our  for the fund’s moves during Q3 2017.The 13F portfolio is very concentrated with the top three holdings accounting for ~32% of the entire portfolio. Recent 13F reports show around 40 long positions. This quarter, Loeb’s portfolio value increased 16.5% from $11.90B to $13.86B. The number of holdings increased from 37 to 44. The largest five individual stock positions are Baxter International, DowDuPont, Alibaba Group Holdings, BlackRock, and Alphabet Inc.Per their Q4 2017 investor letter, Third Point returned 18.1% for 2017 compared to 21.8% for the S&P 500 Index. Annualized returns since December 1996 inception are at ~16% compared to ~8% for the S&P 500 Index. In addition to partner stakes, Third Point also invests the float of Third Point Reinsurance (TPRE).To know more about Dan Loeb's Third Point, check-out his . His activist investing style is covered in the book "".Note: Third Point has a huge $3.5B investment (40M shares including options) in Nestle (NSRGY). It is not reported in the 13F as it is not a 13F security. Nestle is an activist stake and Third Point had the following suggestions for Nestle in their Q4 investor letter: 1) Clarify corporate strategy: defines “nutrition, health, and wellness” as focus but several assets are not core per this definition - ice-cream, frozen pizza etc. Also, skin-health is an outlier and should be unwound, 2) Accelerate portfolio change:  move faster into coffee, pet care, water, and nutrition while disposing ill-fitting ones, 3) Deploy the balance sheet: should look at buyback as well as M&A – below 1.0x leverage and so should be able to do both, and 4) Monetize the L’Oreal stake.New Stakes:Intercontinental Exchange (ICE), Netflix Inc. (NFLX), Lennar Corp. (LEN), and Aetna Inc. (AET): These are medium-sized (~2.5% of the portfolio each) positions established this quarter. ICE is a 2.80% portfolio stake established at prices between $65 and $72 and the stock currently trades just above that range at $72.86. NFLX is a 2.77% portfolio position purchased at prices between $177 and $203 and it is currently well above that at $279. The 2.42% LEN stake was established at prices between $52.75 and $64 and it currently trades at $59.15. AET is a 2.41% portfolio position purchased at prices between $151 and $183 and it is now at $178.Dentsply Sirona (XRAY), General Dynamics (GD), MGM Resorts International (MGM), and Southwestern Energy (SWN): These are small (less than ~1% of the portfolio each) new stakes established this quarter.Note: GD is back in the portfolio after a quarter’s gap. It was a 2.11% portfolio stake built in Q3 2016 at prices between $138 and $156. The position was disposed last quarter at prices between $194 and $207.Pinnacle Foods Inc. (PF), Nexa Resources (NEXA), PG&E Corp. (PCG), Monsanto Company (MON), and iShares 1-3 year treasury bond: These are minutely small (less than 0.5% of the portfolio each) positions established this quarter.Stake Disposals:Bank of America (BAC): The 2.61% position in BAC was established in Q4 2016 at prices between $15.50 and $23. It was reduced by ~23% in Q1 2017 at prices between $22 and $25.50. There was a ~11% increase the following quarter at prices between $22 and $24.50 while last quarter saw a ~18% selling at prices between $22.50 and $25.50. The disposal this quarter was at prices between $25 and $30. The stock is currently at $31.93.T-Mobile US (TMUS): TMUS is a 2% of the portfolio position purchased in Q1 2017 at prices between $56.50 and $65 and reduced by ~27% last quarter at prices between $59.50 and $65.50. The elimination this quarter was at prices between $55 and $64.50. The stock is now at $60.51.Note: TMUS has seen a couple of roundtrips in the portfolio over the last five years: a) a similar ~3% of the US long portfolio was established in Q2 2015 at prices between $31.50 and $40.50 and disposed of in Q4 2015 at prices between $34.50 and $41.50, and b) another similar stake was established in Q4 2013 at $25 per share and eliminated in Q3 2014 at prices between $28.50 and $34.Alexion Pharmaceuticals (ALXN), Banco Macro SA (BMA), Exela Technologies (XELA), Marathon Petroleum (MPC), and Shire plc (SHPG): These are very small (less than ~1% of the portfolio each) positions disposed this quarter.Note: Shire plc has seen several previous roundtrips. The latest was a small position established as a result of Shire’s acquisition of Baxalta last year. Third Point had a position in Baxalta. The stake was eliminated in Q3 2016.Stake Increases:Alphabet Inc. (GOOG): GOOG is a large (top five) 5.25% stake established in Q1 2016 at prices between $678 and $765. It was reduced by ~43% in the following quarter at prices between $668 and $767. Q3 2016 saw a ~38% increase at prices between $692 and $787 while there was a ~23% selling the following quarter at prices between $736 and $813. Q2 2017 saw a ~26% increase at prices between $823 and $984 while last quarter there was a ~45% reduction at prices between $899 and $980. This quarter saw a huge ~120% stake increase at prices between $952 and $1077. The stock is currently at $1103.Note: GOOG has seen a previous roundtrip in the portfolio. A fairly large 3.44% of portfolio stake was established in Q3 2013 at prices between $423 and $435. It was sold in Q2 2014 at prices between $510 and $579.Time Warner Inc. (TWX): The ~4% TWX stake was established in Q4 2016 at prices between $78.50 and $97 and increased by ~17% in the following quarter. Last quarter saw an about turn: ~27% selling at prices between $99 and $103. There was a huge ~120% stake increase this quarter at prices between $87 and $104. The stock is now at $95.07.Note: In October 2016, AT&T (T) agreed to acquire Time Warner in a cash-and-stock ($53.75 cash) deal worth $107.50 per share.Vulcan Materials (VMC): The 2.41% VMC stake was purchased in Q2 2017 at prices between $117 and $134 and increased by ~47% last quarter at prices between $113 and $130. The stock is now at ~$125. There was a ~11% increase this quarter.Danaher Corp. (DHR): The 2.22% DHR stake was established in Q3 2015 at prices between $60.90 and $71.50 and increased by two-thirds in Q1 2016 at prices between $62 and $74. It currently trades well above those ranges at $96.85.  There was a marginal increase this quarter.Note: The prices quoted above are adjusted for the Fortive (FTV) spin-off in July 2016.S&P Global (SPGI): SPGI is a 2.20% position established in Q2 2016 at prices between $96 and $128. Q4 2016 saw a ~20% reduction at prices between $108 and $127 and that was followed with another ~17% selling last quarter at prices between $146 and $157. There was an about-turn this quarter: ~45% increase at prices between $155 and $173. The stock is now at $188.Worldpay Inc. (WP) previously Vantiv (VNTV): WP is a 2.12% portfolio stake built over the last two quarters at prices between $60 and $76. The stock currently trades at $75.94.Mohawk Industries (MHK): The ~2% MHK position was established in Q4 2014 at prices between $125 and $158 and increased by ~220% in H1 2015 at prices between $153 and $194. The five quarters thru Q3 2016 had seen a combined ~60% selling at prices between $150 and $215. There was an about-turn in Q4 2016: one-third increase at prices between $177 and $205. The pattern reversed again in Q1 2017: ~21% sold at prices between $202 and $232. The stock currently trades at $247. There was a ~11% increase this quarter.Grupo Supervielle SA (SUPV), Pampa Energia SA (PAM), and Parsley Energy (PE): These are very small (less than ~1% of the portfolio each) stakes that saw increases this quarter.Stake Decreases:Baxter International (BAX): BAX is Loeb’s largest position at ~17% of the 13F portfolio. The stake was established in Q2 2015 and increased substantially the following quarter. There was a ~11% selling in Q1 2017 at $50.35 and another similar trimming the following quarter at $59.50. This quarter saw another ~12% trimming at $64.23. Loeb’s cost-basis on BAX is $40.05. The stock currently trades at $67.04.Note: Third Point controls ~6.6% of the business.DowDuPont (DWDP): DWDP is currently Third Point’s second-largest individual stock position at ~7.70% of the portfolio. The original Dow Chemical stake was established in Q4 2013 at prices between $38 and $45. In Q2 & Q3 2014, the position was increased by just over 220% at prices between $47 and $55. Q4 2014 saw an about-turn as ~24% of the position was disposed at prices between $43 and $53. Q2 & Q3 2016 saw another ~40% reduction at prices between $49 and $59. Since then, the position has been reduced by ~20% thru minor trimming in most quarters. The stock currently trades at $71.62.Note: DowDuPont is an activist stake. In December 2015, Dow and DuPont announced a merger of equals and that transaction closed last September forming the new entity DowDuPont. The plan was to then split into three separate businesses. In May last year, Third Point suggested an : their main contention was that carve-outs of DOW and DD had performed very well in the past (Example Trinseo & Olin from Dow and Axalta & Chemours from DuPont) and so a similar strategy would be more appropriate than a three-way split. In mid-September, partly in response, DowDuPont announced certain adjustments to the original three-way split.Alibaba Group Holdings (BABA): BABA is a top three 7.47% position established in Q2 2017 at prices between $107 and $144 and increased by ~47% last quarter at prices between $141 and $180. The stock currently trades at $187. There was a ~9% trimming this quarter.Note 1: Alibaba was profiled in Third Point’s Q2 2017 letter. They believe BABA is undervalued and that the advertising platform (primary revenue source) overhaul in 2016 would be a catalyst.Note 2: Alibaba has seen several previous roundtrips in the portfolio.NXP Semiconductors NV (NXPI): NXPI is a 1.82% of the portfolio stake purchased in Q2 2017 at prices between $103 and $110. There was a ~20% reduction this quarter at prices between $113 and $118. The stock is now at ~$126.Note: In October 2016, Qualcomm (QCOM) agreed to acquire NXP Semiconductors for $110 per share cash.  In November last year, Broadcom (AVGO) offered to acquire Qualcomm for $70 per share ($60 in cash) – the offer was independent of whether the NXP deal goes through.  Earlier this month, that deal was sweetened to $82 per share. Qualcomm rejected the modified offer and turned around to offer $127.50 for NXP Semiconductors. They also gained the backing of Elliott Management that had previously opposed the deal.Anthem Inc. (ANTM) and Macerich Company (MAC): These are very small (less than ~1% of the portfolio each) positions that saw reductions this quarter.Kept Steady:BlackRock Inc. (BLK): BLK is a large (top five) 5.75% portfolio stake purchased in Q2 2017 at prices between $377 and $428. The stock is now well above that range at $543.Note: BlackRock was profiled in Third Point’s Q2 2017 letter. Their undervaluation thesis was based on the belief that BLK is valued as an asset manager (low margins) while their earnings power is driven by oligopoly businesses - ETFs (via iShares) and data & analytic services (via Aladdin).Facebook Inc. (FB): FB is a large 4.33% of the portfolio stake established in Q2 2016 at prices between $109 and $121 and increased by ~45% the following quarter at prices between $114 and $131. Q4 2016 saw the position reduced by ~36% at prices between $115 and $133 and that was followed with a ~14% trimming the following quarter at prices between $117 and $143. Q2 2017 saw an about turn: ~17% stake increase at prices between $139 and $155. The stock is now at $176.Constellation Brands (STZ): The fairly large 4.12% STZ position was established in 2012. The three quarters thru Q3 2016 had seen a combined ~38% increase at prices between $135 and $168. There was another ~36% increase in Q4 2016 at prices between $145 and $171. Q2 2017 saw an about-turn: ~17% selling at prices between $161 and $194. The stock is currently at $217.Sotheby’s (BID): BID is a 2.48% of the portfolio position first purchased in Q1 2013. The bulk of the current stake was purchased in Q3 2013 at prices between $39 and $51. The stock currently trades at $46.88. Third Point’s ownership stake in BID is ~13%.Note: BID is an activist stake. Third Point has three board seats and in March 2015 Tad Smith was appointed as the CEO.Sherwin Williams (SHW): The 1.78% SHW stake was acquired in Q2 2016 at prices between $280 and $312. The following quarter saw a 25% increase at prices between $274 and $312. That was followed with another ~14% increase in Q4 2016 at prices between $241 and $278. The position saw significant selling last year: 40% reduction over the first three quarters at prices between $269 and $361. The stock is currently at $397.FMC Corp (FMC): FMC is a 1.50% position established in Q2 2017 at prices between $70 and $77 and increased by ~10% last quarter. It is now at $83.55.Altaba Inc. (AABA), Dell Technologies (DVMT), Dover Corp. (DOV), Green Brick Partners (GRBK), Grupo Financiero Galicia SA (GGAL), Honeywell International (HON), Kadmon Holdings (KDMN), and RSP Permian (RSPP): These small positions (less than ~1.5% of the portfolio each) were kept steady this quarter.Note 1: Loeb controls ~16% of Green Brick Partners (previously BioFuel Energy).Note 2: The bulk of the stake in Kadmon Holdings is from prior to its IPO in July 2016 (PE investment). The biopharma was founded in 2010 by Sam Waksal (ImClone insider trading conviction and 7-year prison term infamy, circa 2003). Loeb controls ~13% of Kadmon Holdings (KDMN).Note 3: Dover Corp is an activist stake. They are looking for the following changes: a) separate energy segment – win-win as it would remove cyclicality from Dover while making the artificial lift franchise (energy segment) an attractive takeover target for strategic buyers, b) address under-earning in core industrial portfolio, and c) optimize capital allocation.The spreadsheet below highlights changes to Loeb’s US stock holdings in Q4 2017:Regulatory Filings thru 11/10/2017: Form 4 11/7– BAX – Disposed 5M shares @ 64.23 – 36M share ownership remain – 6.6% of business – cost basis $40.05.  Form 4 8/17 – BID – very minor 300 share increase @ $47.85 – 6.66M shares remain – 12.7% of business.: Performance: 3.4% in Q3 2017, and 14.5% YTD (S&P was 4.5% & 14.2% respectively). 15.8% since 12/1996 inception compared to 8% for S&P. Constructive on markets due to more favorable conditions for businesses via deregulation and tax reform. Expects markets to move higher – strong equity bias – reduced two-thirds of credit exposure. Biggest risk is recession which is not predictable but they assess the risk is low. 20% of equity exposure are in single-name shorts that have generated significant alpha. New investment: Dover – suggested separating energy segment, address unearning in core industrial portfolio, and optimizing capital allocation. Commentary: DowDupont, Honeywell, Nestle – bullish on all and positive about upcoming changes announced in all three…"