Hedge Fund Manager Dan Loeb Beats The Market: 3 Stocks In Focus

Dan Loeb’s Third Point funds outperformed the market again. In addition to citing luck, Loeb wrote in his letter that his fund follows a framework that encourages being opportunistic. Instead of following the headline stories, the group researches more deeply, to uncover idiosyncratic and uncorrelated opportunities. For example, Greek debt holdings generated strong returns for Third Point, because the fund researched the economic and political factors. This led to holding Greek debt was then tendered during a debt buyback in mid-December 2012.

Top Winners in fourth quarter through December 31 2012 were:

1.  Greek Debt
2.  Yahoo! Inc. (YHOO)
3.  Murphy Oil Corp. (MUR)
4.  Delphi Corp.
5.  American International Group Inc. (AIG)

Top Losers in fourth quarter through December 31 2012 were:

1.     Apple Inc. (AAPL)
2.     Gold
3.     Overseas Shipholding Group. Inc. (OSGIQ)

New Positions

Loeb initiated 3 new positions in the last reported quarter.   

1. Herbalife Ltd. ( HLF): A network marketing company, sells weight management, nutritional supplement, energy, sports and fitness, and personal care products worldwide. Market cap at $4.32B, most recent closing price at $40.02.

A drop of nearly half in just one month provided an entry point for Loeb’s fund. The stock dropped after a short-seller publicized a bearish thesis on the company. Third Point holds 8% of the common stock. Loeb sites growth, a leading market position, rising margins, and demonstration to shareholder-friendliness as reasons for owning a position in the company.

Loeb does not believe the accusation that the company is a fraud and a pyramid scheme has merit. Herbalife has a forward price of profit (“POP”) of 9.

 

2. Morgan Stanley ( MS): Provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide. Market cap at $39.95B, most recent closing price at $20.17.

The hedge fund manager started a position in this company, citing a turnaround in its weak business (fixed income, currency, and commodities sales and trading) in 2013 as one of the catalysts. The stock trades at a 20% discount to tangible book. Loeb bought shares at an average cost of $16.77 per share. Morgan Stanley has a forward price of profit of 11.

3. Tesoro Corporation ( TSO): Engages in refining and marketing petroleum products in the United States. Market cap at $5.92B, most recent closing price at $42.17.

This $5.7 billion company is in the refining and marketing business. The company is shareholder friendly, and the hedge fund believes there is hidden value in its retail and pipelines businesses. Tesora is valued at around 2.6 times its 2012 EBITDA. Third Point believes the shares could double from its $40 stock price level. Tesoro has a POP of just 7.

 

Written by Kapitall’s Chris Lau .

 

 

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