Third Point leader Daniel Loeb (Trades, Portfolio) released his fourth-quarter 2020 portfolio earlier this week.
Using an event-driven, value-oriented approach to picking stocks, the guru's New York-based firm is known for taking activist positions in underperforming companies that have a catalyst that will help unlock value for shareholders.
Keeping these criteria in mind, Loeb entered 35 new positions during the quarter, divested of nine holdings and added to or trimmed a number of other existing investments. Notable trades for the three months ended Dec. 31 included new holdings in Upstart Holdings Inc. (UPST, Financial) and Alphabet Inc. (GOOGL, Financial), the sale of Fortive Corp. (FTV, Financial), a reduction in Alibaba Group Holdings Ltd. (BABA, Financial) and a boost to the Intuit Inc. (INTU, Financial) stake.
Upstart Holdings
In his largest trade of the quarter, Loeb invested in 13.3 billion shares of Upstart Holdings (UPST, Financial), dedicating 4.01% of the equity portfolio to the stake. It is now the guru's fifth-largest holding. The stock traded for an average price of $40.75 per share during the quarter.
The San Carlos, California-based company, which operates an online lending platform, has a $6 billion market cap; its shares were trading around $83.35 on Thursday with a price-earnings ratio of 1,655.09 and a price-sales ratio of 36.12.
Since its initial public offering in December, the stock has gained more than 150%.
GuruFocus rated Upstart's financial strength 3 out of 10.
In his fourth-quarter letter to investors, Loeb said the company "exemplifies Third Point's approach to lifecycle investing."
"Following a lead from our Structured Credit group, which had looked at funding Upstart's loan pools, we led Upstart's Series C in June of 2015 and Rob Schwartz joined their Board," he wrote. "Third Point delivered value on capital markets strategy, staffing, and organizational development, and eventually became a loan buyer on the platform. As Upstart grew, we maintained our ownership through further investments and placed a 10% order of the IPO in December 2020."
Of the gurus invested in Upstart, Loeb by far has the largest stake with 18.47% of outstanding shares. George Soros (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also own the stock.
Alphabet
The guru picked up 260,000 Class C shares of Alphabet (GOOGL, Financial), allocating 3.51% of the equity portfolio to the position. Shares traded for an average price of $1,685.58 each during the quarter.
He previously sold out of the stock in the second quarter of 2018. It is now the eighth-largest holding in the equity portfolio.
The tech conglomerate headquartered in Mountain View, California, which owns Google, YouTube and a number of other businesses, has a market cap of $1.42 trillion; its shares were trading around $2,102.22 on Thursday with a price-earnings ratio of 35.78, a price-book ratio of 6.88 and a price-sales ratio of 8.44.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced. The GuruFocus valuation rank of 3 out of 10 supports this assessment since the share price and price ratios are approaching 10-year highs.
Alphabet's financial strength was rated 8 out of 10 by GuruFocus on the back of adequate interest coverage and a robust Altman Z-Score of 11.07. Although assets are building up at a faster rate than revenue is growing, indicating it may be becoming less efficient, the return on invested capital eclipses the weighted average cost of capital. This means it is creating value.
The company's profitability scored a 9 out of 10 rating, driven by strong margins and returns that outperform a majority of competitors. Alphabet also has a moderate Piotroski F-Score of 4, indicating its operations are stable, and consistent earnings and revenue growth contributed to a predictability rank of five out of five stars. According to GuruFocus, companies with this rank return an average of 12.1% annually over a 10-year period.
With 0.25% of outstanding shares, Ken Fisher (Trades, Portfolio) is Alphabet's largest guru shareholder. Other top guru investors include PRIMECAP Management (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), Frank Sands (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Bill Nygren (Trades, Portfolio) and Chris Davis (Trades, Portfolio).
Fortive
After establishing a 3 million-share stake in Fortive (FTV, Financial) during the third quarter, the investor divested of his entire holding, impacting the equity portfolio by -1.95%. The stock traded for an average per-share price of $68.32 during the quarter.
GuruFocus estimates Loeb gained 17.06% on the investment.
The Everett, Washington-based company, which focuses on industrial growth through innovation in the areas of field instrumentation, transportation, sensing, product realization, automation and specialty as well as franchise distribution, has a $22.35 billion market cap; its shares were trading around $66.16 on Thursday with a price-earnings ratio of 15.11, a price-book ratio of 2.67 and a price-sales ratio of 3.5.
According to the Peter Lynch chart, the stock is trading near its fair value.
GuruFocus rated Fortive's financial strength 6 out of 10 on the back of adequate interest coverage and a high Altman Z-Score of 3.34. The WACC, however, eclipses the ROIC, indicating issues with creating value.
The company's profitability also fared well with a 7 out of 10 rating. Although the operating margin is in decline, Fortive has strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 6. Revenue per share had been in decline for the past five years, however.
Andreas Halvorsen (Trades, Portfolio) is the company's largest guru shareholder with a 2.36% stake. Jim Simons (Trades, Portfolio)' Renaissance Technologies, Pioneer, Ray Dalio (Trades, Portfolio), Jones, Joel Greenblatt (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Murray Stahl (Trades, Portfolio) also have positions in the stock.
Alibaba
Loeb curbed his stake in Alibaba (BABA, Financial) by 44.55%, selling 1.13 million shares. The transaction had an impact of -3.32% on the equity portfolio. The stock traded for an average price of $277.43 per share during the quarter.
He now holds 1.4 million shares total, which account for 2.51% of the equity portfolio. GuruFocus estimates he has gained 10.79% on the investment.
The Chinese e-commerce company has a market cap of $716.48 billion; its shares were trading around $263.95 on Thursday with a price-earnings ratio of 30.82, a price-book ratio of 5.08 and a price-sales ratio of 7.67.
Based on the Peter Lynch chart, the stock appears to be overvalued.
Driven by a good cash-debt ratio, a comfortable level of interest coverage and a robust Altman Z-Score of 6.51, GuruFocus rated Alibaba's financial strength 7 out of 10.
The company's profitability scored a 9 out of 10 rating. Although the operating margin is in decline, Alibaba has strong returns that outperform a majority of competitors as well as a high Piotroski F-Score of 4. Despite recording consistent earnings and revenue growth, the 2.5-star predictability rank is on watch. GuruFocus says companies with this rank typically return an average of 7.3% annually.
Of the gurus invested in Alibaba, Fisher has the largest stake with 0.52% of outstanding shares. Additional top guru shareholders are PRIMECAP, Sands, Pioneer, Chase Coleman (Trades, Portfolio), Davis, Dodge & Cox, Sarah Ketterer (Trades, Portfolio), Ron Baron (Trades, Portfolio) and David Tepper (Trades, Portfolio), among others.
Intuit
Boosting his Intuit (INTU, Financial) holding by 233.33%, Loeb purchased 700,000 shares. The transaction had an impact of 2.05% on the equity portfolio. During the quarter, shares traded for an average price of $351.49 each.
The guru now holds 1 million shares total, representing 2.93% of the equity portfolio and is his 10th-largest holding. GuruFocus data shows he has gained 24.8% on the investment so far.
The Mountain View, California-based software company has a $113.27 billion market cap; its shares were trading around $413.02 on Thursday with a price-earnings ratio of 55.47, a price-book ratio of 20.88 and a price-sales ratio of 13.93.
The Peter Lynch chart indicates the stock is overvalued. The GuruFocus valuation rank of 1 out of 10 aligns with this assessment since the price-sales ratio and share price are both approaching 10-year highs.
Intuit's financial strength was rated 7 out of 10 by GuruFocus on the back of a comfortable level of interest coverage as well as a robust Altman Z-Score of 19.08. The ROIC also surpasses the WACC, indicating good value creation.
The company's profitability scored an 8 out of 10 rating, driven by an expanding operating margin, returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 5. Steady earnings and revenue growth also resulted in a two-star predictability rank. According to GuruFocus, companies with this rank return, on average, 6% annually.
With a 1.85% stake, Sands is Inuit's largest guru shareholder. PRIMECAP, Pioneer, Coleman, Catherine Wood (Trades, Portfolio), Cohen, Louis Moore Bacon (Trades, Portfolio) and Grantham also have significant positions in the stock.
Additional trades and portfolio performance
Other new positions Loeb established during the quarter included Aptiv PLC (APTV, Financial), Stanley Black & Decker Inc. (SWK, Financial), Nike Inc. (NKE, Financial), Catalent Inc. (CTLT, Financial), Leslies Inc. (LESL, Financial), CarMax Inc. (KMX) and RH (RH).
The guru's $12.97 billion equity portfolio, which is composed of 74 stocks, is most heavily invested in the consumer cyclical (22.39%) and communication services (18.27%) sectors.
In his fourth-quarter letter, Loeb said the Third Point Offshore Fund posted a 20.5% return for full-year 2020, outperforming the S&P 500's 18.4% return.
Disclosure: No positions.
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