Daniel Loeb (Trades, Portfolio), manager of Third Point, LLC, disclosed last week that his firm exited its positions in Campbell Soup Co. (CPB, Financial) and Boston Scientific Corp. (BSX, Financial) during the first quarter. The two transactions, plus the reduction in Baxter International Inc. (BAX, Financial), impacted the equity portfolio more than the top two new buys in Walt Disney Co. (DIS, Financial) and Charter Communications Inc. (CHTR, Financial) did.
Managing a portfolio of 32 stocks, Loeb seeks long-term capital through an event-driven, value-oriented investment style. The investor seeks situations in which a catalyst has potential to unlock value.
As of the quarter-end, Loeb’s $6.27 billion equity portfolio contains 32 stocks, of which six represent new holdings. The portfolio, which had a 32% turnover ratio during the quarter, has a 45.47% weight in health care and over a 13% weight in consumer cyclical and technology.
Loeb sold the firm’s 14.4 million shares of Campbell Soup, trimming the equity portfolio 8.18%. The shares averaged $48.13 during the first quarter.
The activist investor took a 5.55 million-share stake in the Camden, New Jersey-based packaged food company during the second quarter of 2018 and expanded the position to 18 million shares during the third quarter of 2018, following the company’s “disastrous” earnings performance for the three months ending April 29, 2018. Loeb called out the company’s lack of CEO succession planning and that it should seek a strategic buyer given the obstacles Campbell Soup faced.
According to GuruFocus estimates, Loeb gained approximately 16.96% on Campbell Soup since he first bought shares during the June 2018 quarter.
GuruFocus ranks Campbell’s financial strength 3 out of 10 on the back of interest coverage and debt ratios underperforming approximately 70% of global competitors. The company’s interest coverage ratio of 2.66 is below Benjamin Graham’s safe threshold of five, suggesting potential struggle to pay interest on outstanding long-term debt.
Third Point sold 5.92 million shares of Baxter, trimming the position 33.83% and the equity portfolio 5.69%. Shares averaged $86.41 during the first quarter.
The Deerfield, Illinois-based company manufactures medical products across several business segments, which include renal, acute therapies, medication delivery and pharmaceuticals. GuruFocus ranks the company’s profitability 7 out of 10: Even though Baxter’s three-year revenue growth rate of 3.90% outperforms just 51.58% of global competitors, the company’s operating margin has increased approximately 17.10% per year on average over the past five years and is outperforming over 63% of global medical device companies.
The firm sold its 5 million shares of Boston Scientific, paring the equity portfolio 2.60%. Shares averaged $39.29 during the quarter. According to GuruFocus estimates, Third Point gained approximately 3.61% on the stock since it first purchased shares during the first quarter of 2019.
The Marlborough, Massachusetts-based company produces less-invasive medical devices that are inserted into the human body through small openings and cuts. GuruFocus ranks the company’s financial strength 4 out of 10: Debt ratios are underperforming over 80% of global competitors on the back of increasing long-term debt levels over the past three years.
The firm purchased 1.425 million shares of Walt Disney, giving the stake 2.20% of the equity portfolio. Shares averaged $127.19 during the first quarter.
Shares of the Burbank, California-based entertainment giant climbed 7.15% on Monday, during a day where the Dow Jones Industrial Average had its biggest one-day gain since April. The 30-stock index closed at 24,597.37, up 911.95 points or 3.85% from last Friday’s close of 23,685.42.
The firm purchased 300,000 shares of Charter, giving the holding 2.09% weight in the equity portfolio. Shares averaged $489.92 during the first quarter.
GuruFocus ranks the Stamford, Connecticut-based cable company’s profitability 7 out of 10 on the back of expanding operating margins and a high Piotroski F-score of 8, suggesting strong business operations.
Disclosure: No positions.
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