Dan Loeb’s Third Point Portfolio: Key Moves and Insights from Q2 2024

Portfolio Composition

Top Holdings

Dan Loeb’s Third Point portfolio is heavily concentrated in a few key holdings, with the top three positions accounting for approximately 30% of the total portfolio value.

1. Amazon.com (AMZN): Representing 11.28% of the portfolio, Amazon was established at prices between ~$98 and ~$130 and is currently trading at ~$176. This significant position underscores Loeb’s confidence in Amazon’s long-term growth prospects.
2. PG&E Corp. (PCG): Making up around 11% of the portfolio, PG&E is currently trading at $19.94. Notably, there was a ~7% trimming of this position during the quarter, indicating some profit-taking or risk management.
3. Microsoft Corp. (MSFT): Comprising ~8% of the portfolio, Microsoft is currently trading at ~$409. There have been ongoing reductions in this position as gains are harvested, reflecting a strategy to lock in profits while maintaining a substantial stake in the tech giant.

New Significant Stakes

Loeb has also made several new significant investments, reflecting his strategic pivot towards companies with strong growth potential and competitive advantages.

1. Apple Inc. (AAPL): A new entry with 4.70% of the portfolio, Apple was purchased at ~$165 to ~$216 and is now trading at ~$223. This investment aligns with Loeb’s bullish outlook on AI-related demand driving Apple’s future revenue and earnings.
2. Amphenol Corp. (APH): Representing 2.16% of the portfolio, Amphenol was established at ~$55 to ~$70 and is currently trading at ~$62. This investment highlights Loeb’s interest in companies with robust industrial applications.
3. KB Home (KBH): Making up 1.69% of the portfolio, KB Home was purchased at ~$60 to ~$74 and is now trading at ~$81. This stake indicates a strategic bet on the housing market.
4. Roper Technologies (ROP): Comprising 1.55% of the portfolio, Roper was established at ~$510 to ~$563 and is currently trading at ~$552. This investment reflects Loeb’s focus on companies with strong technological and industrial capabilities.

Notable Stake Increases

Loeb has significantly increased his stakes in several companies, indicating strong conviction in their future performance.

1. Taiwan Semiconductor (TSM): With a ~4% stake and a ~72% increase this quarter, TSM is currently trading at ~$161. This move underscores Loeb’s confidence in the semiconductor industry’s growth prospects.
2. Corpay Inc. (CPAY): Representing 2.33% of the portfolio, Corpay saw an ~18% increase and is trading at ~$314. This investment highlights Loeb’s belief in the potential of Corpay’s B2B payments business.
3. Apollo Global Management (APO): With a 2% stake and a ~90% increase, Apollo is currently trading at ~$111. This significant increase indicates Loeb’s confidence in the asset management sector.
4. Uber Technologies (UBER): Comprising 1.75% of the portfolio, Uber saw a ~320% increase and is now trading at ~$72. This substantial increase reflects Loeb’s bullish outlook on the ride-sharing and delivery services market.

Stake Disposals

Loeb has also made significant reductions in certain positions, reflecting a strategic reallocation of capital.

1. Goldman Sachs (GS): There was a notable reduction in the stake, indicating a shift away from traditional financial services.
2. Marvell Technology (MRVL): Significant reductions were made, possibly reflecting concerns about the company’s future growth prospects or a strategic pivot towards other tech investments.

Performance Analysis

Portfolio Returns

The Third Point portfolio returned 1.8% in Q2 2024, underperforming the S&P 500, which returned 4.3%. Despite this short-term underperformance, the long-term annualized returns since inception (December 1996) stand at an impressive 13.1%. This long-term performance underscores Loeb’s ability to generate substantial returns over extended periods.

Key Contributors

The top positive contributors to the portfolio’s performance included:

1. TSMC
2. Alphabet Inc.
3. Amazon.com Inc.
4. Vistra Corp.
5. Apple Inc.

These companies, particularly those in the technology sector, have driven significant gains, reflecting Loeb’s strategic focus on high-growth industries.

Key Detractors

The top negative contributors included:

1. Bath & Body Works Inc.
2. Advance Auto Parts Inc.
3. Ferguson PLC
4. Airbus SE
5. Corpay Inc.

These detractors highlight the challenges faced by consumer-oriented and event-driven investments, which have underperformed relative to the broader market.

Strategic Insights

Balanced Investment Approach

Dan Loeb’s Q2 2024 letter emphasizes a balanced investment strategy that incorporates both digital and physical world investments. While acknowledging the significance of digital sectors—specifically hyperscalers, AI platforms, and semiconductors—Loeb argues for the attractiveness of often-overlooked physical world investments.

Digital Investments

Loeb’s portfolio includes significant positions in leading technology companies such as Amazon, Microsoft, and Apple. These investments reflect his confidence in the continued growth and innovation within the tech sector. The substantial stake in TSMC further underscores his belief in the critical role of semiconductors in driving technological advancements.

Physical World Investments

Loeb also identifies sectors such as aggregates, nuclear power, life science tools, specialty alloys, and aerospace as key areas where companies possess strong competitive moats, unique products, and high capital intensity. These investments are seen as providing long-term stability and growth, particularly in a market heavily focused on tech giants.

AI-Driven Growth

Loeb’s investment in Apple is particularly noteworthy, given his bullish outlook on AI-related demand driving future revenue and earnings. The introduction of the “Apple Intelligence” suite of AI-enabled features is expected to create a forced upgrade cycle for iPhone users, enhancing Apple’s revenue from both hardware and services.

Strategic Reallocations

The significant increases in stakes for companies like TSMC, Corpay, Apollo Global Management, and Uber reflect Loeb’s strategic reallocations towards high-growth sectors. These moves indicate a focus on companies with strong growth potential and competitive advantages.

Risk Management

The trimming of positions in companies like PG&E and Microsoft, as well as the disposal of stakes in Goldman Sachs and Marvell Technology, highlight Loeb’s proactive risk management approach. By reallocating capital and locking in gains, Loeb ensures a balanced and diversified portfolio that can withstand market volatility.

Conclusion

Dan Loeb’s Third Point portfolio for Q2 2024 reflects a strategic blend of investments in both digital and physical world sectors. The portfolio’s composition, with significant stakes in leading technology companies and strategic investments in traditional industries, underscores Loeb’s balanced approach to investment.

The substantial increases in stakes for companies like TSMC, Corpay, Apollo Global Management, and Uber indicate a focus on high-growth sectors, while the trimming and disposal of certain positions reflect proactive risk management. Despite a short-term underperformance relative to the S&P 500, the long-term annualized returns of 13.1% since inception highlight Loeb’s ability to generate substantial returns over extended periods.

Overall, Loeb’s investment strategy for Q2 2024 demonstrates a calculated pivot towards identifying value in both digital and physical world investments, ensuring a diversified and resilient portfolio capable of navigating changing market conditions.