Dan Loeb Sold Out of Alibaba -- Here’s Where He’s Investing Instead

NEW YORK (TheStreet) -- Three years after first making the case for Alibaba (BABA) , Dan Loeb is done. His firm, Third Point, exited its billion-dollar stake in the Chinese e-commerce giant in the first quarter of the year.

Loeb has had his eye on Alibaba since it was under the Yahoo!  (YHOO) umbrella, and when it became public in September 2014, he dove in. "Our enthusiasm for the Alibaba story has underpinned multiple investments at Third Point and now that the company is public, we have established a significant direct investment in Alibaba shares," he wrote in a letter to investors last year.

However, his most recently regulatory filing reveals that investment is no more. Instead, his firm, which oversees about $17.4 billion in assets, is placing its bets elsewhere.

Loeb's most noteworthy new stake is in Yum! Brands (YUM) , in which he has a $260 million position as of March 31. The second-largest global quick service restaurant company, the company's brands include Kentucky Fried Chicken, Pizza Hut and Taco Bell.

In his first-quarter letter to Third Point investors, Loeb discussed the decision to invest. "We think investors should want to own Yum! for its unique open-ended middle-class growth story in China and its strong and growing franchise-led cash flows outside China," he wrote. "We also expect that Yum! management, consistent with their prior public statements, will consider a variety of value-enhancing actions to ensure that the market properly rewards its investors for both compelling earnings streams."

Loeb also picked up new stakes in NXP Semiconductors (NXPI), valued at nearly $160 million at the end of the first quarter, and in FedEx (FDX), valued at $149 million, as well as McKesson (MCK), Clayton Williams Energy (CWEI) and JM Smucker Company (SJM), among others.

Third Point has a relatively strong first quarter, with the Third Point Offshore Fund gaining 3.3%, compared with the 1% climb of the S&P 500. Since its December 1996 inception, the fund has produced an annualized return of 17.2%.

In his first-quarter letter to investors, Dan Loeb acknowledged that so far in 2015, "the real excitement has been overseas." However, he said he remains constructive on the U.S. for three reasons: anticipated improved economic data in the next few quarters, the unlikelihood of a June rate hike and the expectation of a gradual path higher in contrast to previous rate shifts.

"These factors should create an environment where growth improves and monetary policy stays flexible, which is generally good for equities (higher multiples notwithstanding," he wrote. "We may follow last year's playbook and ignore the old adage to 'sell in May and go away.'"

Loeb continues to bet on Amgen (AMGN), which is now Third Point's top holding, valued at nearly 1.6 billion as of March 31.

The investment was the firm's biggest winner in 2014, and Dan Loeb appears to believe that in 2015 it will keep winning. In a February letter to investors, he wrote that his team feels "this story is still in its early innings and there is still substantially more value for Amgen shareholders to realize." This even though the stock has climbed more than 45% over the past year.

Following Amgen, Third Point's top public equity holdings as of the end of the first quarter are Actavis (ACT), Dow Chemical (DOW), Ally Financial (ALLY) and eBay (EBAY). The firm has invested a combined total of $4.8 billion in its top five holdings - nearly half of the $10.8 billion in investments disclosed.

To see Loeb's top 30 holdings, visit the Third Point portfolio on Stockpickr.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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