"Tracking Dan Loeb’s Third Point Portfolio – Q2 2018 Update"
"Dan Loeb's 13F portfolio value increased from $13.32B to $14.35B this quarter. The number of positions decreased from 40 to 38.Third Point added NXP Semiconductors and PayPal Holdings while dropping Alphabet.The top three positions are Baxter International, NXP Semiconductors, and United Technologies. Together, they are at one-third 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 08/10/2018. Please visit our  to get an idea of his investment philosophy and our  for the fund’s moves during Q1 2018.The 13F portfolio is very concentrated with the top three holdings accounting for one-third of the entire portfolio. Recent 13F reports show around 40 long positions. This quarter, Loeb’s portfolio value increased ~8% from $13.32B to $14.35B. The number of holdings decreased from 40 to 38. The largest five individual stock positions are Baxter International, NXP Semiconductors, United Technologies, DowDuPont, and PayPal Holdings.Per their Q2 2018 investor letter, Third Point gained 0.8% thru Q2 2018 YTD compared to 2.6% gain for the S&P 500 Index. Annualized returns since December 1996 inception are at 15.4% compared to 8.1% 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 as it is not a 13F security.New Stakes:NXP Semiconductors (NXPI) and PayPal Holdings (PYPL): These two are large stakes established this quarter. The top three ~8% NXPI position was purchased at prices between $92 and $120 and the stock currently trades near the low end of that range at $95. PYPL is a ~6% of the portfolio stake established in the low-80s. The stock is currently at $87.Note 1: NPXI is back in the portfolio after a quarter’s gap. NXPI 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 last quarter was at prices between $115 and $126.Note 2: On the PayPal stake establishment, Loeb has said that he sees parallels with Amazon and Netflix. Also he sees $125 in eighteen months.Visa Inc. (V), Campbell Soup (CPB), Dell Technologies (DVMT), Deere & Co. (DE), and Far Point Acquisition (FPAC) & Units: These are small (less than ~1.5% of the portfolio each) new positions established this quarter.Note 1: Regulatory filings since the quarter ended show them owning 17M shares of Campbell Soup (5.65% of the business). This is compared to 5.5M shares in the 13F. The purchases were made at prices between $35 and $42.Note 2: 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.Note 3: DVMT is back in the portfolio after a quarter’s gap.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 are very small (less than ~1% of the portfolio each) stakes established this quarter.Stake Disposals:Alphabet Inc. (GOOG): GOOG was a large 4.48% 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 the following quarter there was a ~45% reduction at prices between $899 and $980. Q4 2017 saw a huge ~120% stake increase at prices between $952 and $1077. There was a ~16% selling last quarter at prices between $1001 and $1176 and the disposal this quarter was at prices between $1007 and $1175. The stock is currently at ~$1238.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. Q3 2017 saw an about turn: ~27% selling at prices between $99 and $103. There was a huge ~120% stake increase in Q4 2017 at prices between $87 and $104. 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 and that transaction closed in June.Intercontinental Exchange (ICE): ICE was a 2.72% portfolio stake established in Q4 2017 at prices between $65 and $72 and the stock currently trades at $73.27. There was a ~9% trimming last quarter and the position was disposed this quarter at prices between $70 and $76.Mohawk Industries (MHK): The 1.46% 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 $182. There was a ~11% increase in Q4 2017 while last quarter saw a ~17% reduction. The position was disposed this quarter at prices between $204 and $246.Anthem Inc. (ANTM): ANTM was a small ~1.3% of the portfolio stake. The position saw a stake doubling last quarter at prices between $216 and $258. There was an about turn this quarter: position eliminated at prices between $220 and $245. The stock currently trades at ~$260.Monsanto Company (MON): The bulk of the ~1% MON position was purchased last quarter at prices between $117 and $124. Bayer AG (BAYRY) closed the acquisition of Monsanto at $128 per share in June.PagSeguro Digital (PAGS): PAGS was a 1.31% portfolio stake established last quarter at prices between $27 and $39 and disposed this quarter at around the same price range. The stock currently trades at $28.39.Black Knight Inc. (BKI), Green Brick Partners (GRBK), Grupo Financiero Galicia SA (GGAL), Grupo Supervielle SA (SUPV), Mercadolibre Inc. (MELI), Nexa Resources (NEXA), Pampa Energia SA (PAM), and PBF Energy (PBF): These are very small (less than ~1% of the portfolio each) positions disposed this quarter.Note: Loeb had a ~16% ownership stake in Green Brick Partners (previously BioFuel Energy) as of Q1 2018. The disposal was at ~$9 per share.Stake Increases:United Technologies (UTX): UTX is large (top three) 6.62% of the portfolio position established last quarter at prices between $122 and $138 and the stock currently trades at $133. There was a ~7% stake 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.DowDuPont (DWDP): DWDP is currently Third Point’s fourth-largest individual stock position at 6.57% 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 saw a marginal increase. The stock currently trades at $67.74.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.Dover Corp. (DOV): The ~2% DOV stake saw a 140% increase last quarter at prices between $77 and $88. The stock currently trades at $81.55. There was a very minor ~2% stake increase this 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 believe Dover is trading at a ~30% discount to peers.Electronic Arts (EA) and Marathon Petroleum (MPC): The 1.62% EA position was purchased last quarter at prices between $105 and $129 and increased by around one-third this quarter at prices between $117 and $147. The stock is now at ~$131. MPC is a 1.52% stake established last quarter at prices between $63 and $74 and increased by ~55% this quarter at prices between $69 and $83. The stock is currently at $80.93.Adobe Systems (ADBE), iShares 1-3 year treasury bond, Microsoft Corp. (MSFT), and Salesforce.com (CRM): These small (less than ~1.5% of the portfolio each) positions saw significant increases this quarter. The 1.55% MSFT stake saw a ~300% increase at prices between $88 and $103 and it is now above that at $109. ADBE is a 1.19% stake that saw a ~75% increase at prices between $212 and $258. It is now at $254. The very small 0.59% CRM position saw a ~40% stake increase at prices between $115 and $140 and it currently goes for $146.Stake Decreases:Facebook Inc. (FB): FB is 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. 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 and that was followed with a similar increase last quarter at prices between $152 and $193. There was a ~25% selling this quarter at prices between $155 and $202. The stock is now at ~$180.Constellation Brands (STZ): The fairly large ~3% 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 $213. There was a ~8% trimming last quarter and that was followed with a ~13% selling this quarter.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 stock is now just below those ranges at ~$111. There was a ~11% increase in Q4 2017 and that was followed with a similar increase last quarter. This quarter saw a ~7% trimming.BlackRock Inc. (BLK): BLK is a 2.26% portfolio stake purchased in Q2 2017 at prices between $377 and $428. The position was sold down by ~30% last quarter at prices between $509 and $593 and another ~40% this quarter at prices between $500 and $550. The stock is now at ~$479. Third Point is harvesting 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.Lennar Corp. (LEN): The ~2% LEN stake was established in Q4 2017 at prices between $52.75 and $64 and increased by ~18% last quarter at prices between $56.50 and $72. It currently trades near the low end of those ranges at $53.38. For investors attempting to follow Loeb, Lennar is a good option to consider for further research. There was a ~4% trimming this quarter.Note: Third Point believes the 6x pro forma earnings they paid was a bargain considering that Lennar is the best homebuilder managed by the best veteran team.S&P Global (SPGI): SPGI is a 1.85% 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 ~$201. Last quarter saw a ~17% selling at prices between $166 and $196 and that was followed with a ~13% reduction this quarter at prices between $187 and $209. Loeb is opportunistically harvesting gains.Wynn Resorts (WYNN): The 1.78% WYNN stake was purchased last quarter at prices between $162 and $201 and it is now below that range at ~$149. This quarter saw marginal trimming.Worldpay Inc. (WP) previously Vantiv (VNTV): WP is a 1.65% portfolio stake built in H2 2017 at prices between $60 and $76. The stock currently trades well above that range at $92.14. There was a ~30% reduction this quarter at prices between $78 and $85.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 stock is currently at ~$443. There was a ~3% trimming last quarter and that was followed with a ~6% reduction this quarter. Loeb is starting to harvest gains.Kept Steady:Baxter International (BAX): BAX is Loeb’s largest position at ~19% 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 $71.50.Note: Third Point controls ~6.6% of the business.Netflix Inc. (NFLX): NFLX is a large 5.45% portfolio position purchased in Q4 2017 at prices between $177 and $203 and it is currently well above that range at ~$346.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 ~$180. There was a ~9% trimming in Q4 2017 and that was followed with a one-third reduction last quarter at prices between $174 and $205.Note: Alibaba has seen several previous roundtrips in the portfolio over the years.Sotheby’s (BID): BID is a 2.52% 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 ~$47. 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.Danaher Corp. (DHR): The 2.23% 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 ~$100.  There was a ~2% trimming last quarter.Note: The prices quoted above are adjusted for the Fortive (FTV) spin-off in July 2016.Kadmon Holdings (KDMN): The minutely small 0.26% 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 Q2 2018:Regulatory Filings thru 5/22/2018: Form 4 – 5/16 & 2/26 – BID – 6.66M shares – minor transaction,5/4/2018 –  - – Performance: Lost 0.6% for Q1 2018 (offshore fund) compared to a loss of 0.8% for the S&P 500. 15.6% annualized since inception (12/1996) compared to 8% for S&P. AUM ~$17.7B. Alternative to equity: riskless two-year money. Do not think recession is close but it is definitely closer. S&P is range bound and so selectivity will matter. Net exposure reduced by 20%. 15% taken out of long book and short exposure increased to 25%. Will continue to look to enhance short-book. Winners: Netflix, PagSeguro, Airbus, Blackrock, CGG SA. Losers: Nestle, DowDupont, Facebook, Fannie/Freddie, Vulcan Materials. NEW POSITION: UTX – strong franchise but lagged index by ~45% over last five years. 3-way split recommended – Otis, CCS, and Aerospace. Sum-of-parts EOY 2019 projected at ~$210 per share. UPDATES: DowDupont – DWDP – Materials, Specialty & Ag Co future spins has strong parallels to LYB, MMM, and MON. 2020 estimates are identical but valuation is 40% higher for them. So, $92 FVE is reasonable – expects to fill that gap in the next twelve months. Lennar – LEN – considers it the best homebuilder managed by the best veteran team. CalAtlantic acquisition & ancillary investments early in the cycle not valued as they do not contribute to earnings yet. Overall, paid 6x pro forma earnings which is a bargain. Dover – DOV – Several positive announcements: 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 – strong background operating industrial assets. Remain Co trading at ~30% discount to peers.NOTE: Read the latest investor letters.Q1 2018 – UTX, Lennar, DoverQ4 2017 - NestleQ3 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),"