"Tracking Dan Loeb’s Third Point Portfolio – Q3 2017 Update"
"Dan Loeb's 13F portfolio value increased 5.45% from $11.28B to $11.90B this quarter. The number of positions increased from 32 to 37.Third Point increased Alibaba Group Holdings while decreasing Alphabet and dropping General Dynamics.The top three 13F positions are Baxter International, Alibaba Group Holdings, and DowDuPont. Together, they are at ~40% 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 11/09/2017. Please visit our  to get an idea of his investment philosophy and our  for the fund’s moves during Q2 2017.The 13F portfolio is very concentrated with the top three holdings accounting for ~40% of the entire portfolio. Recent 13F reports show around 35 long positions. This quarter, Loeb’s US long portfolio value increased 5.45% from $11.28B to $11.90B. The number of holdings increased from 32 to 37. The largest five individual stock positions are Baxter International, Alibaba Group Holdings, DowDuPont, BlackRock, and Facebook Inc.Per their Q3 2017 investor letter, Third Point returned 3.4% for the quarter and 14.5% YTD. This is compared to 4.5% and 14.2% respectively for the S&P 500 Index. Annualized returns since December 1996 inception are at 15.8% 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 is looking for changes in the following areas: 1) improving productivity; 2) returning capital to shareholders; 3) re-shaping the portfolio for growth; and, 4) monetizing the L’Oréal Stake. During Nestle’s Investor Day in September, Nestle’s new CEO Dr. Ulf Mark Schneider announced several initiatives to revitalize the business. Third Point’s Q3 Investor Letter was supportive of the new initiatives and acknowledged Dr. Schneider’s willingness to specify a margin target and commitment to selling assets.New Stakes:DowDuPont (DWDP): DWDP is currently Third Point’s third-largest individual stock position at ~8.75% of the US long 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 $70.23.Note: DowDuPont is an activist stake. In December 2015, Dow and DuPont announced a merger of equals and that transaction closed this September forming the new entity DowDuPont. The plan was to then split into three separate businesses. In May this 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.Vantiv Inc. (VNTV), Shire plc (SHPG), Marathon Petroleum (MPC), and Dover Corp. (DOV): These are small (less than ~1.5% of the portfolio each) new stakes established this quarter.Note 1: 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.Note 2: 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.Macerich Company (MAC), Grupo Financiero Galicia SA (GGAL), Altaba Inc. (AABA), Grupo Supervielle SA (SUPV), Exela Technologies (XELA), and Pampa Energia SA (PAM): These are very small (less than ~1% of the portfolio each) new stakes established this quarter.Stake Disposals:General Dynamics (GD): GD was a 2.11% portfolio stake built in Q3 2016 at prices between $138 and $156. The position was disposed of this quarter at prices between $194 and $207. The stock is now at $199.Charter Communications (CHTR): CHTR was a 1.49% of the portfolio position established in Q2 2016 as a result of the merger of Charter Communications and Time Warner Cable - Third Point had around 1.2M shares of Time Warner Cable. The stake was more than doubled soon after at prices between $198 and $233. Q3 2016 saw a ~30% reduction at prices between $229 and $278 and that was followed with another ~23% trimming in the following two quarters. There was a ~40% selling last quarter at prices between $313 and $353. The disposal this quarter was at prices between $329 and $403. The stock is now at $341. Third Point harvested huge gains.Humana Inc. (HUM): HUM was a 1.60% of the portfolio stake. It was established in Q3 2016 at prices between $153 and $180 and increased by ~70% the following quarter at prices between $165 and $217. Q1 2017 saw an about turn: ~40% sold at prices between $195 and $219. Last quarter saw another ~47% selling at prices between $206 and $241 and the elimination this quarter was at prices between $231 and $259. The stock is now at $247. Loeb harvested gains.Hewlett Packard Enterprise (HPE) and EQT Corp. (EQT): These are very small (less than ~1% of the portfolio each) positions established in the last two quarters but disposed of this quarter.Stake Increases:Alibaba Group Holdings (BABA): BABA is a top three 9.58% position established last quarter at prices between $107 and $144 and increased by ~47% this quarter at prices between $141 and $180. The stock currently trades above those ranges at $185.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 last year is a catalyst.Note 2: Alibaba has seen several previous roundtrips in the portfolio.Mohawk Industries (MHK): The 1.87% 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 $265. There was a ~3% increase this quarter.Vulcan Materials (VMC) and FMC Corp (FMC): These two positions established last quarter were increased substantially this quarter. The 2.36% VMC stake was purchased at prices between $117 and $134 and increased by ~47% this quarter at prices between $113 and $130. The stock is now at $125. FMC is a 1.65% position established at prices between $70 and $77 and increased by ~10% this quarter. It is now at $92.16.RSP Permian (RSPP) and Parsley Energy (PE): These are small (less than ~1.5% of the portfolio each) positions established in Q1 2017 and increased substantially in the last two quarters. RSPP and PE are down 16% and 23% respectively YTD.Stake Decreases:Facebook Inc. (FB): FB is a large (top five) ~5% 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. Last quarter saw an about turn: ~17% stake increase at prices between $139 and $155. The stock is now at $179. There was minor trimming this quarter.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 last quarter at prices between $22 and $24.50 while this quarter saw a ~18% selling at prices between $22.50 and $25.50. The stock is currently at $26.49.Alphabet Inc. (GOOG): GOOG is a 2.58% 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. Last quarter saw a ~26% increase at prices between $823 and $984 while this quarter there was a ~45% reduction at prices between $899 and $980. The stock is currently at $1031.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 2.37% TWX stake was established in Q4 2016 at prices between $78.50 and $97 and increased by ~17% in the following quarter. This quarter saw an about turn: ~27% selling at prices between $99 and $103. The stock is now at $87.05.Note: In October last year, AT&T (T) agreed to acquire Time Warner in a cash-and-stock ($53.75 cash) deal worth $107.50 per share. Earlier this week, AT&T’s CEO commented that they are in active discussions with the Department of Justice and that the timing of the closing of the deal is now uncertain.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% this quarter at prices between $59.50 and $65.50. The stock is now at $56. The buy-thesis is based on the idea that a combination of TMUS with either Sprint (S) or Dish Networks (DISH) is the only real alternative to the duopoly of AT&T (T) and Verizon (VZ).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.Sherwin Williams (SHW): The 1.81% 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 this year: 40% reduction so far at prices between $269 and $361. The stock is currently at $387.S&P Global (SPGI): SPGI is a 1.64% 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 this quarter at prices between $146 and $157. The stock is now at $158.Alexion Pharmaceuticals (ALXN) and Banco Macro SA (BMA): These are very small (less than ~1% of the portfolio each) positions established last quarter and reduced this quarter.Kept Steady:Baxter International (BAX): BAX is Loeb’s largest position at ~22% of the US long 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 last quarter at $59.50. Loeb’s cost-basis on BAX is $40.05. The stock currently trades at $65.39.Note: Regulatory filings since the quarter ended show them owning 36M shares. This is compared to 41M shares in the 13F. Third Point sold 5M shares at $64.23. They still control ~6.6% of the business.BlackRock Inc. (BLK): BLK is a large (top five) 5.83% portfolio stake purchased last quarter at prices between $377 and $428. The stock is now well above that range at $467.Note: BlackRock was profiled in Third Point’s Q2 2017 letter. Their undervaluation thesis is 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).Constellation Brands (STZ): The fairly large ~4.2% 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. Last quarter saw an about-turn: ~17% selling at prices between $161 and $194. The stock is currently at $218.Sotheby’s (BID): BID is a 2.58% of the US long portfolio position first purchased in Q1 2013. The bulk of the current position was purchased in Q3 2013 at prices between $39 and $51. The stock currently trades at $47.05. 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.NXP Semiconductors NV (NXPI): NXPI is a 2.57% of the portfolio stake purchased last quarter at prices between $103 and $110 and the stock is now at $115.Note: Last October, Qualcomm (QCOM) agreed to acquire NXP Semiconductors for $110 per share cash.  Earlier this week, Broadcom (AVGO) offered to acquire Qualcomm for $70 per share ($60 in cash) – the offer is independent of whether the NXP deal goes through.Danaher Corp. (DHR): The 2.38% 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 $92.98.Note: The prices quoted above are adjusted for the Fortive (FTV) spin-off in July 2016.Anthem Inc. (ANTM): The 2% ANTM position was purchased in Q4 2016 at prices between $117 and $169 and the stock is now at $216. There was a ~9% stake increase last quarter.Dell Technologies (DVMT), Honeywell International (HON), Green Brick Partners (GRBK) and Kadmon Holdings (KDMN): These small positions (less than ~1.5% of the portfolio each) were kept steady this quarter.Note 1: Loeb controls ~25% 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 ~18% of Kadmon Holdings (KDMN).The spreadsheet below highlights changes to Loeb’s US stock holdings in Q3 2017:8/13/2017: The Nestle stake (see below for details) was mentioned as the first comment in my Q2 2017 update. Should consider adding a note in the article in the Q3 2017 update…: Performance: 4.6% in Q2 2017, and 10.7% YTD. 15.8% since 12/1996 inception compared to 7.8% for S&P. Positioning: we reduced investments in bank financials, exited reflationary macro trades, and reoriented the portfolio towards investments in companies that benefit from low inflation – believes next rate hike will be on hold until growth and inflation accelerate. Europe is a bright spot led by our announcement on Nestle. M&A currently in a holding pattern waiting on clarity – tax-reform promised but not delivered. BAX – very appreciative of CEO Almeida -  60% total return in the last 18 months with EV/EBITDA unchanged at 12.5-13x. BABA – revamped advertising (primary revenue source) platform should help. The following are other catalysts: a) Personalized advertising still in infancy compared to Google’s & FB’s – that means, tremendous growth potential. B) Brand advertising, an area BABA was behind should pickup with the launch of uni-marketing – a new ad buying software targeted at brands. C) Ad-load has untapped potential – currently Taobao ad-load is at 10-15% compared to 30-50% at commercial searches on google and baidu. D) Mobile-monetization gap has narrowed, e) long monetization runway. Believes BABA is undervalued: the core-business valuation is at 15x their 2019 EPS estimate against a growth rate of more than 30%. BLK – undervaluation thesis based on the belief that it is valued as an asset manager with earnings power mostly driven by oligopoly businesses - ETFs (via iShares) and data & analytic services (via Aladdin). Shares trading at less than 15x 2019 estimated EPS – outlook is for consistent mid-teens EPS growth. Sees ~40% total return potential over the next couple of years.Regulatory Filings thru 8/12/2017: Form 4 & 13D - BAX – 6/1/2017 – 5M shares disposed at $59.5 per share. 41M shares owned – 7.5% of business – cost-basis $40.05 per share.6/28/2017 - NSRGY -  - largest ever stake - Third Point said it should slim down and sell some businesses (23% stake in L’Oreal and the US candy business potentially) to focus on the most profitable areas.  Letter: 40M shares held – including options 3.5B investment. Likes to see the following: 1) Improving Productivity; 2) Returning Capital to Shareholders; 3) Re-shaping the Portfolio; and, 4) Monetizing its L’Oréal Stake.5/25/2017 - Alternate Dow Chemical Du Pont merger & spinoff  suggested: their main contention is that focused businesses carved out of DOW/DD has performed very well in the past - Trinseo & Olin (from Dow) and Axalta & Chemours (from DuPont) were pointed out as examples. As such, more granularity is better.NOTE: Read the latest investor letters.Q3 2017 – DOV, DowDupont, Honeywell, Nestle.Q2 2017 – BAX, BABA, and BLK.Q1 2017 - Honeywell, Unicredit spA, and E.On commentary. Also, note on FRAC Sand Miners.Q4 2016 - General banking & structured credit commentary.Q3 2016 - Apigee & Akarna - PE portfolio businesses that IPOed and were acquired. 2008 Apigee investment generated ~20% IRR (2.4x) until acquisition by Google. Akarna - 3.1x return after acquisition by Allergan over 18 months.Q2 2016 - Baxter - BAX, Didi (ride sharing China private),"