Daniel Loeb Top Dividend Picks
The firm’s hedge funds include Third Point Partners, Third Point Opportunities Master Fund, Third Point Ultra Master Fund and Third Point Resources. He also holds a capital venture, Third Point Ventures.
Regarding his letters, less than 10% of Third Point's $7.5 billion goes to shareholder activism.
The fund holds 65 positions represented as follows: 40% in large caps, 35% in mid-caps and the remaining 25% in small-cap equities.
Third Pointe Portfolio is present in several sectors where it has increased and reduced its positions, making good deals. In the energy sector, Loeb added $198 million in its El Paso Corp. position and completely withdrew its $137 million in Alpha Natural Resources. With the opening of Massey in 2010 and its further buy by Third Position, Loeb is able to control the largest domestic metallurgical reserves.
Regarding the services sector, Third Point added $90 million to the $130 million existing position. It increased its position in eBay Inc. (EBAY) and in Safeway Inc. (SWY), a supermarket chain. In the latter case, the macroeconomic situation made earnings fall from $2.18 to $1.58. Anyway, there are signs of pick-up. Third Point only has to wait.
What happens with EBAY? Earnings have flattened between 2008 and 2010 but double-digits are expected to strongly grow.
In the technology sector, Loeb's position has remained the same, $260 million through some restructuring and reshuffling. The company has withdrawn part of its position from Lender Processing Services (LPS) to reinvest it in NXP Seiconductors NV (NXPI). The growth projections of the latter are much better than the former's and earnings are expected to increase from $1.17 in 2010 to $2.42 to 2011 and to $3.22 in fiscal year 2012.
Finally, in the consumer cyclical sector, Third Pointe added $83 million to its $25 million position, which was distributed as follows: a new $49 million position in Whirlpool Corp. (WHR) and a new $45 million position in Accuride Corp. (ACW). In the spring of 2010, $27 million was added in Xerium Technologies Inc. (XRM).
Although I don't have positions in any of these companies I think they are interesting. They show how diversified Third Position's portfolio is.
But I'd rather look specifically to some of Loeb's stocks.
CreXus Investment Corp. (CXS): the firm acquires, manages, and finances commercial mortgage loans and other commercial real estate debt, commercial mortgage-backed securities and other commercial real estate-related assets. It is a good value to investors, especially with a 9.5% in dividend.
Cablevision (CVC): Cablevision is one of the largest multimedia companies in the U.S. It is divided into two segments: cable TV and high-speed data business and Newsday, a daily newspaper published in Long Island. Despite the risky situation CVC has lately been going through due to management´s bad moves, the debt burden, the fierce competition of Verizon and the reduction in earnings, Loeb invested in it. I think his try is related to the increase in CVC´s dividends, which have doubled in the last two years, the fact that its footprint is in New York, which houses one of the wealthiest populations and the hope that a company with such experience in the market will certainly enter into an upward trend.
Whirlpool (WPC): I think there is no need to explain what the company does. Its name speaks for itself. Unfortunately the trends in new home construction, the consumers’ reluctance to purchase major applications and the competitive pricing environment have caused the company to tumble down. However, it is a good chance for investors because the stock is trading below net asset value; the firm still has a good position in US, it is widely known worldwide through its brands, the debt has been significantly reduced and dividends have yielded well above 10-year treasuries.
BP Plc (BP) is one of the world's leading oil companies and is attractive to investors. Its shares are currently trading at $43.41; it has EPS of 7.32, P/E ratio of 5.90 and a dividend rate of 1.68 which can be translated into a 3.87 yield. Current share pricing makes BP a suitable stock for investors willing to have long positions.
The Williams Companies Inc. (WMB), the natural gas producer and pipeline firm, deserves the highest honors, especially due to its quarterly cash dividend, which has risen to 25 cents per share. I would really bet on it. Indeed, apart from the 25% increase, the company has distributed a double dividend in December 2010. This increase is coupled with the management´s new policy – a permanent 10 to 15% dividend growth for the next years.
Daniel Loeb and Third Point are doing a very good job. What do you think?