"Tracking Dan Loeb’s Third Point Portfolio – Q3 2018 Update"
"Dan Loeb's 13F portfolio value decreased from $14.35B to $12.84B this quarter. The number of positions decreased from 38 to 31.Third Point added American Express and increased Campbell Soup while dropping NXP Semiconductors and Facebook.The top three positions are Baxter International, United Technologies, and PayPal Holdings. Together, they are at ~37% of the portfolio.This article is part of a series that provides an ongoing analysis of the changes made to Dan Loeb’s 13F stock portfolio on a quarterly basis. It is based on Third Point’s regulatory  filed on 11/09/2018. Please visit our  to get an idea of his investment philosophy and our  for the fund’s moves during Q2 2018.The 13F portfolio is very concentrated with the top three holdings accounting for ~37% of the entire portfolio. Recent 13F reports show around 35 long positions. This quarter, Loeb’s portfolio value decreased ~11% from $14.35B to $12.84B. The number of holdings decreased from 38 to 31. The largest five individual stock positions are Baxter International, United Technologies, PayPal Holdings, DowDuPont, and Alibaba Group Holdings.Per their Q3 2018 investor letter, Third Point gained 0.6% YTD compared to 10.6% gain for the S&P 500 Index. Annualized returns since December 1996 inception are at 15.2% compared to 8.4% for the S&P 500 Index. In addition to partner stakes, Third Point also invests the float of Third Point Reinsurance (TPRE) and capital from London listed closed-end fund Third Point Offshore (TPNTF).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 report as it is not a 13F security. In July 2018, Third Point released a  calling for a three-way internal split (Beverages, Nutrition, and Grocery) of Nestle’s businesses along with divestitures of non-core assets (primarily L’Oréal).New Stakes:American Express (AXP): AXP is a fairly large ~4% portfolio stake established this quarter at prices between $98 and $111 and the stock currently trades at $108.Note: The AXP investment was profiled in Third Point’s Q3 2018 . They believe sustainable double‐digit EPS growth will be achieved under new CEO Stephen Squeri as he focuses on topline growth and under‐appreciated structural opportunities in Commercial and International. That should result in a share price of ~$135 in eighteen months.Merck & Co (MRK), Shire plc (SHPG), and Iqvia Holdings (IQV): These are small new stakes established this quarter. The ~2.5% MRK position was purchased at prices between $60.50 and $71 and the stock is now above that at $74.86. SHPG is a ~2.25% stake established at prices between $166 and $181 and it now goes for ~$180. The 1.52% IQV position was purchased at prices between $99 and $131 and the stock currently trades at $124.Diamondback Energy (FANG), WPX Energy (WPX), and Arco Platform Ltd (ARCE): These are very small (less than ~0.5% of the portfolio each) positions established during the quarter.Stake Disposals:NXP Semiconductors (NXPI): NXPI was a top three ~8% position purchased last quarter at prices between $92 and $120 and disposed this quarter at prices between $85 and $110. The stock currently trades at $83.69.Note: NPXI has seen a recent round-trip. It was a 1.82% of the portfolio stake purchased in Q2 2017 at prices between $103 and $110. There was a ~20% reduction in Q4 2017 at prices between $113 and $118 and the elimination in Q1 2018 was at prices between $115 and $126.Electronic Arts (EA): The 1.62% EA position was purchased in Q1 2018 at prices between $105 and $129 and increased by around one-third last quarter at prices between $117 and $147. The disposal this quarter was at prices between $111 and $149. The stock is now at $88.89.Facebook Inc. (FB): FB was a large ~4% 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. The next two quarters saw the positon reduced by ~50% at prices between $115 and $143. Q2 2017 saw an about turn: ~17% stake increase at prices between $139 and $155 and that was followed with a similar increase in Q1 2018 at prices between $152 and $193. There was a ~25% selling last quarter at prices between $155 and $202 and the elimination this quarter was at prices between $160 and $218. The stock is now at ~$145.BlackRock Inc. (BLK): BLK was a 2.26% portfolio stake purchased in Q2 2017 at prices between $377 and $428. The position was sold down by ~30% in Q1 2018 at prices between $509 and $593 and another ~40% last quarter at prices between $500 and $550. The disposal this quarter was at prices between $470 and $513. The stock is now at ~$414. Third Point harvested gains.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). The stock was trading at ~$420 per share at the time.Vulcan Materials (VMC): The 2.47% VMC stake was purchased in Q2 2017 at prices between $117 and $134 and increased by ~47% the following quarter at prices between $113 and $130. The position was disposed this quarter at prices between $107 and $130. The stock is now at ~$106.Wynn Resorts (WYNN): The 1.78% WYNN stake was purchased in Q1 2018 at prices between $162 and $201 and sold this quarter at prices between $126 and $167. It is now at ~$98.32.Sherwin Williams (SHW): The 1.56% 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 remaining stake was disposed this quarter at prices between $407 and $478. The stock is currently at ~$415. Loeb harvested gains.Dell Technologies (DVMT), Energen Corp. (EGN), PVH Corp. (PVH), iShares China Large Cap ETF (FXI) Calls, Camping World Holdings (CWH), Agilent Technology (A), and Braskem S A (BAK): These very small (less than ~1% of the portfolio each) stakes were eliminated this quarter.Stake Increases:United Technologies (UTX): UTX is large (top three) ~9% of the portfolio position established in Q1 2018 at prices between $122 and $138 and the stock currently trades at ~$131. There was a ~7% stake increase last quarter and that was followed with a ~11% increase this quarter. For investors attempting to follow Loeb, UTX is a good option to consider for further research.Note: United Technologies is an activist stake. Third Point is pursuing a three-way split of the business.Alibaba Group Holdings (BABA): BABA is a large ~5% position established in Q2 2017 at prices between $107 and $144 and increased by ~47% in the following quarter at prices between $141 and $180. The stock currently trades at ~$145. There was a ~9% trimming in Q4 2017 and that was followed with a one-third reduction in Q1 2018 at prices between $174 and $205. This quarter saw a marginal increase.Note: Alibaba has seen several previous roundtrips in the portfolio over the years.Campbell Soup (CPB): The large ~5% CPB stake was established last quarter and increased this quarter. The bulk of the position was purchased at prices between $35 and $42 and the stock is now at $38.97.Note 1: Regulatory filings since the quarter ended show them owning 21M shares of Campbell Soup (6.98% of the business). This is compared to 18M shares in the 13F.Note 2: CPB position is an activist stake. Third Point initially pursued the replacement of the entire 12-member board but has since settled on seeking five board seats.Constellation Brands (STZ): The fairly large ~4% 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 $203. Last two quarters had seen a ~20% selling at prices between $208 and $234 while this quarter saw a similar increase at prices between $200 and $222.Microsoft Corp. (MSFT): The 3.65% MSFT stake saw a ~300% increase last quarter at prices between $88 and $103 and that was followed with a ~80% increase this quarter at prices between $99 and $115. It is now at ~$110.Worldpay Inc. (WP) previously Vantiv (VNTV): WP is a 2.40% portfolio stake built in H2 2017 at prices between $60 and $76. The stock currently trades well above that range at $90.11. There was a ~30% reduction last quarter at prices between $78 and $85. This quarter saw a minor ~5% increase.Marathon Petroleum (MPC): MPC is a ~2% stake established in Q2 2018 at prices between $63 and $74 and increased by ~55% last quarter at prices between $69 and $83. The stock is currently at $67.18. There was another ~13% increase this quarter.Adobe Systems (ADBE), Deere & Co. (DE), and iShares 1-3 year treasury bond: These small (less than ~2% of the portfolio each) positions saw significant increases this quarter. ADBE is a 1.89% stake that saw a ~75% increase last quarter at prices between $212 and $258 and another ~30% increase this quarter at prices between $242 and $275. It is now at $245. The 1.58% DE position was established last quarter at prices between $125 and $159 and increased by ~23% this quarter at prices between $135 and $154. The stock is currently at ~$145. The iShares 1-3 year treasury bond position is a minutely small 0.03% stake.Stake Decreases:PayPal Holdings (PYPL): PYPL is a large (top three) ~6% of the portfolio stake established last quarter in the low-80s and increased by ~10% this quarter. The stock is currently at $86.76.Note: On PayPal, Loeb has said that he sees parallels with Amazon and Netflix. Also he sees $125 PPS in eighteen months.DowDuPont (DWDP): DWDP is currently Third Point’s fourth-largest individual stock position at ~6% 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 had been reduced by ~30% thru minor trimming in most quarters. This quarter also saw a ~15% selling at prices between $64 and $72. The stock currently trades at $58.68.Note 1: Third Point’s Q1 2018 letter discussed the position: Materials, Specialty & Ag Co future spins has strong parallels to LyondellBasell (LYB), 3M (MMM), and Monsanto (MON) respectively - 2020 estimates are identical but valuation is ~40% lower. They expect the valuation gap ($92 FVE) to narrow by Q1 2019.Note 2: 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.Netflix Inc. (NFLX): NFLX is a 3.64% portfolio position purchased in Q4 2017 at prices between $177 and $203. The stake was reduced by ~40% this quarter at prices between $317 and $419. It is currently at ~$304. Loeb is harvesting short-term gains.Lennar Corp. (LEN): The ~2% LEN stake was established in Q4 2017 at prices between $52.75 and $64 and increased by ~18% next quarter at prices between $56.50 and $72. Last two quarters saw a ~17% selling at prices between $47 and $64. It currently trades at $41.90.S&P Global (SPGI): SPGI is a 1.50% 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 in Q3 2017 at prices between $146 and $157. There was an about-turn in the following quarter: ~45% increase at prices between $155 and $173. The stock is now at ~$186. Last three quarters have seen a combined ~45% reduction at prices between $166 and $215. Loeb is opportunistically harvesting gains.Salesforce.com (CRM): The very small 0.62% CRM position saw a ~20% selling this quarter at prices between $137 and $160. Last quarter had seen a ~40% stake increase at prices between $115 and $140. The stock is now at $137.Kept Steady:Baxter International (BAX): BAX is Loeb’s largest position at ~22% 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. Q4 2017 saw another ~12% trimming at $64.23. Loeb’s cost-basis on BAX is $40.05. The stock currently trades at $63.48.Note: Third Point controls ~6.6% of the business.Dover Corp. (DOV): The 2.76% DOV stake saw a 140% increase in Q1 2018 at prices between $77 and $88. The stock currently trades at $86.42. There was a very minor ~2% stake increase last quarter.Note 1: The prices quoted above are adjusted to reflect the spinoff of Apergy (APY) that closed in May.Note 2: Dover Corp is an activist stake. Third Point’s Q1 2018 letter discussed the position: a) spin-off of energy business Apergy should reduce volatility, b) cash-EPS reporting change should show strong cash generation, and c) Transition to new CEO Richard Tobin should be a positive – strong background operating industrial assets. They believed Dover is trading at a ~30% discount to peers.Danaher Corp. (DHR): The 2.75% 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 ~$104.Note: The prices quoted above are adjusted for the Fortive (FTV) spin-off in July 2016.Sotheby’s (BID): BID is a 2.55% 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 $40.96. 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.Visa Inc. (V) and Far Point Acquisition (FPAC) & Units: These are small (less than ~2% of the portfolio each) positions established last quarter and kept steady this quarter.Note: Far Point Acquisition is a SPAC that Third Point co-sponsored. It will have a focus on Financial Technology. Ex-NYSE (Intercontinental Exchange subsidiary) President Tom Farley is CEO.Kadmon Holdings (KDMN): The minutely small 0.24% stake in KDMN was kept steady this quarter.Note: 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).The spreadsheet below highlights changes to Loeb’s 13F stock holdings in Q3 2018:7/31/2018 - $300M CPB  built.7/24/2018 –  – Performance: 0.8% for first half vs 2.6% for S&P 500, 15.4% since December 1996 inception compared to 8.1% for S&P 500 Index. DWDP & NSRGY lost money in the quarter although they expect them to rebound. NEW POSITION: PayPal (PYPL) – sees parallels with Amazon, Netflix – sees $125 in 18 months – so cost-basis might be in the low-80s. New Equity Strategy: co-sponsoring the SPAC Far Point – Financial Technology focus (ex-NYSE – ICE president Tom Farley is CEO).Regulatory Filings thru 8/11/2018: 13D 8/9 – CPB – 17M shares – 5.65% of business - $35 to $42 price range from 6/11 to 8/8, Form 4 & 13D/A – 6/26 – GBRK – 7.14M shares disposed @ ~$9 per share. 13D 6/25, Form 4 6/18, Form 3 6/11 – FPAC – 19.69M shares – 24.9% of business – SPAC IPO related acquisition,"