"Tracking Dan Loeb’s Third Point Portfolio – Q2 2017 Update"
"Dan Loeb's 13F portfolio value increased ~10% from $10.25B to $11.28B this quarter. The number of positions decreased from 37 to 32.Third Point added Alibaba Group Holdings & BlackRock while dropping JP Morgan Chase.The top three 13F positions are Baxter International, Dow Chemical, and BlackRock. 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 US stock portfolio on a quarterly basis. It is based on Third Point’s regulatory  filed on 08/11/2017. Please visit our  to get an idea of his investment philosophy and our  for the fund’s moves during Q1 2017.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 US long portfolio value increased ~10% from $10.25B to $11.28B. The number of holdings decreased from 37 to 32. Largest five individual stock positions are Baxter International, Dow Chemical, BlackRock, Alibaba Group Holdings, and Alphabet Inc.Per their Q2 2017 investor letter, Third Point returned 4.6% for the quarter compared to 3.1% for the S&P 500 Index. Annualized returns since December 1996 inception are at 15.8% compared to 7.8% 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 "".New Stakes:BlackRock Inc. (BLK): BLK is a top-three 5.8% portfolio stake purchased this quarter at prices between $377 and $428. The stock is now near the top end of that range at $424.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). Third Point sees ~40% total return potential over the next couple of years.Alibaba Group Holdings (BABA): BABA is a top-five 5.62% position established this quarter at prices between $107 and $144 and the stock currently trades above that range at $152.Note 1: Alibaba was profiled in Third Point’s Q2 2017 letter. They believe BABA is undervalued as the core-business valuation is at 15x 2019 EPS estimate compared to a growth rate of more than 30%. Also, the advertising platform (primary revenue source) overhaul last year is a catalyst.Note 2: Alibaba has seen several previous roundtrips in the portfolio. It is back in the portfolio after a quarter’s gap.NXP Semiconductors NV (NXPI): NXPI is a 2.62% of the portfolio stake purchased this quarter at prices between $103 and $110 and the stock is now at $112.Note: Last October, Qualcomm agreed to acquire NXP Semiconductors for $110 per share cash.Vulcan Materials (VMC), Alexion Pharmaceuticals (ALXN), FMC Corp (FMC), Banco Macro SA (BMA), and EQT Corp. (EQT): These are small (less than ~2% of the portfolio each) new positions established this quarter.Stake Disposals:Salesforce.com (CRM) and Qualcomm Inc. (QCOM): CRM is a 2.41% of the portfolio position established last quarter at prices between $70.50 and $84 and disposed of this quarter at prices between $82 and $91. The stock currently goes for $88.29. QCOM is a ~2% of the portfolio stake purchased last quarter at prices between $52.50 and $67 and sold this quarter at prices between $52.50 and $59.50. The stock is currently at $52.72.JPMorgan Chase (JPM): The 3.21% portfolio stake in JPM was purchased in Q4 2016 at prices between $66.50 and $87 and reduced by ~30% last quarter at prices between $83 and $93.50. The stake was sold-out this quarter at prices between $82 and $91.50. The stock is currently at $91.42.Zayo Holdings (ZAYO): ZAYO is a ~2% position purchased in Q4 2016 at prices between $29.50 and $35 and reduced by ~14% last quarter at prices between $30 and $34. The disposal this quarter was at prices between $31 and $35.50. It currently trades at $33.82.Alcoa Corp. (AA), Celanese Corp. (CE), Enerplus Corp. (ERF), Enphase Energy (ENPH), Halcon Resources Corp. (HK), Nomad Foods (NOMD), Pioneer Natural Resources (PXD), Rice Energy (RICE), and Snap Inc. (SNAP): These very small (less than ~1% of the portfolio each) positions were disposed of this quarter.Note 1: Third Point's Q2 2017 letter noted a shift in portfolio positioning during the quarter: they 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 is on hold until growth and inflation accelerate.Note 2: Loeb controlled ~5.1% of Enphase Energy as of Q1 2017. The disposal was at prices between 80c (bulk) and $1.10 per share.Note 3: Third Point controlled ~3.9% of Nomad Foods as of Q1 2017.Stake Increases:Dow Chemical (DOW): DOW is currently Third Point’s second-largest individual stock position at ~9% of the US long portfolio. The original 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. The stock currently trades at $63.26. There was a ~8% further trimming last quarter. This quarter saw a marginal increase.Note: DOW is an activist stake. In December 2015, Dow and DuPont (DD) announced a merger of equals with plans to separate into three businesses after the merger. In May this year, Third Point suggested an  focused on more focused businesses: their main contention is that carve-outs of DOW and DD have performed very well in the past (Example Trinseo & Olin from Dow and Axalta & Chemours from DuPont) and so a similar strategy is more appropriate than a three-way split.Alphabet Inc. (GOOG): GOOG is a top-five 4.74% 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. There was a ~7% increase last quarter. This quarter saw another ~26% increase at prices between $823 and $984. The stock is currently at $914.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.Facebook Inc. (FB): FB is a large 4.68% 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 last quarter at prices between $117 and $143. This quarter saw an about turn: ~17% stake increase at prices between $139 and $155. The stock is now at $168.Time Warner Inc. (TWX): The 3.34% TWX stake was established in Q4 2016 at prices between $78.50 and $97 and increased by ~17% last quarter. The stock is now at $102. There was a ~7% further increase this quarter.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.Bank of America (BAC): The 3.23% position in BAC was established in Q4 2016 at prices between $15.50 and $23. It was reduced by ~23% last quarter at prices between $22 and $25.50. There was a ~11% increase this quarter at prices between $22 and $24.50. The stock is currently at $23.86.T-Mobile US (TMUS): TMUS is a 2.82% of the portfolio position purchased last quarter at prices between $56.50 and $65 and the stock is now near the top end of that range at $63.61. There was a 5% increase this quarter. 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.Danaher Corp. (DHR): The 2.47% 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 at $79.82. Q3 2016 saw a ~17% increase while the following quarter saw a ~28% selling. Last quarter saw a ~6% trimming while there was a similar increase this quarter.Note: The prices quoted above are adjusted for the Fortive (FTV) spin-off in July 2016.Anthem Inc. (ANTM): The 2.08% ANTM position was purchased in Q4 2016 at prices between $117 and $169 and the stock is now at $189. There was a ~9% stake increase this quarter.Hewlett Packard Enterprise (HPE), RSP Permian (RSPP), and Parsley Energy (PE): These are very small (less than ~1% of the portfolio each) positions established last quarter and increased this quarter.Stake Decreases: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 last quarter at $50.35 and another similar trimming this quarter at $59.50. The cost-basis on his remaining stake is $40.05. The stock currently trades at $59.84.Note: Baxter was profiled in Third Point’s Q2 2017 letter. Loeb is very appreciative of the operational progress the company has made: 60% total return in the last 18 months with EV/EBITDA unchanged at 12.5-13x.Constellation Brands (STZ): The fairly large 4.29% 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. This quarter saw an about-turn: ~17% selling at prices between $161 and $194. The stock is currently at $196. Loeb is starting to harvest gains.Sherwin Williams (SHW): The 2.72% 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 stock is currently at $332. Last quarter saw a ~10% trimming and that was followed with a ~17% selling this quarter at prices between $308 and $361.General Dynamics (GD): GD was a very small 0.47% portfolio stake as of Q2 2016. The following quarter saw a huge ~280% increase at prices between $138 and $156. The stock is now well above that range at $198 and the position is at 2.11% of the portfolio. Last two quarters have seen a ~4% trimming each.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 ~62% 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 last quarter: ~21% sold at prices between $202 and $232. The stock currently trades at $245. There was a ~8% trimming this quarter.Humana Inc. (HUM): HUM is currently 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. Last quarter saw an about turn: ~40% sold at prices between $195 and $219. This quarter saw another ~47% selling at prices between $206 and $241. The stock is now at $250. Loeb is harvesting gains.Charter Communications (CHTR): CHTR is a 1.49% of the portfolio position established in Q2 2016 as a result of the merger of Charter Communications and Time Warner Cable that closed in May - Third Point had around 1.2M shares of Time Warner Cable. Third Point also more than doubled the stake 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 this quarter at prices between $313 and $353. The stock is now at $395. Third Point is harvesting gains.Honeywell International (HON): The small ~1.5% portfolio stake in HON saw a ~7% trimming this quarter.Kept Steady:Sotheby’s (BID): BID is a 3.17% 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 $48.49. Third Point’s ownership stake in BID is at ~13%.Note: BID is an activist stake. Third Point has three board seats and in March 2015 Tad Smith was appointed as the new CEO.S&P Global (SPGI): SPGI is a 1.94% position established in Q2 2016 at prices between $96 and $128. Q4 2016 saw a ~20% reduction at prices between $108 and $127. The stock is now at $148. There was a ~6% further trimming last quarter.Dell Technologies (DVMT): DVMT is a small 1.56% stake established in Q3 2016 and increased by ~13% in Q4 2016. There was a very minor ~4% trimming last quarter.Green Brick Partners (GRBK) and Kadmon Holdings (KDMN): These small positions (less than ~1% 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 Q2 2017:(Released April 27, 2017): Performance: 5.9% in the quarter compared to 6.1% for S&P 500. 15.8% annualized since inception compared to 7.8% for S&P 500. A) Several new initiatives where we believe the environment is ripe to take actions to remedy poor performance, b) actively positioned our portfolio to absorb modest S&P sell-offs in order to remain aggressive buyers at appealing prices. There is a risk of inflation catching the Fed flat-footed, but we see this surfacing later in 2018 or 2019. Chinese nominal GDP growth has potentially peaked, but the main event there will be the change of government this fall and so we expect a muted status quo until then. Expects US cyclical names to get a tailwind from US policy shifts this year. Improving global growth rather than “Trump Trade” is currently the focus. New positions primarily in the financials, industrials, and energy sectors - Honeywell, E.On, and UniCredit SpA were commented on.13G/D/A, Form 3/4 thru 5/21/2017: Form 4 - 5/16 - BID - 6.66M shares. Form 4 - 2/17 - few shares as Director Compensation. 13D/A - 5/15 - ENPH - 0 - sold 6.25M shares between 0.80 (bulk) and $1.15. 13D/A - 3/20 - 6.25M shares - 5.1%. Form 4 - 3/15 - KDMN - 1.5M shares purchased at $3.36, owns 9.4M shares. It came with 4/2018 4.5 strike warrants of 595K shares (0.4 WTS for each share purchased). 13D/A - 3/1 - BAX - 46M shares - 8.5%, 2/28 - Form 4 - 5.9M shares sold at $50.35. 13G - 2/13 - NOMD - 10.65M shares - 5.8%.NOTE: Read the latest investor letters.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),"