Third Point leader Daniel Loeb (Trades, Portfolio) released his portfolio for the third quarter 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 with a catalyst that will help unlock value for shareholders.
In his quarterly shareholder letter, Loeb noted that 2021 has been a good year for both Third Point’s portfolio and the markets.
“Risk assets have climbed a wall of worry as easy financial conditions and post -vaccine enthusiasm created a favorable market backdrop,” he wrote. “Looking ahead to 2022, we remain constructive but increasingly cautious, as the tapering of fiscal and monetary stimulus should reduce support for asset prices. On the positive side, consumer balance sheets remain robust and inventories low, allowing for sell-in, and transitory supply shocks should resolve over the next few quarters.”
Keeping these considerations in mind, Loeb entered 35 new positions during the quarter, exited 24 stocks and added to or trimmed a slew of other existing investments. Notable trades for the three months ended Sept. 30 included a new investment in Alight Inc. (ALIT, Financial), a reduction in the Intel Corp. (INTC, Financial) holding and the divestment of SoFi Technologies Inc. (SOFI, Financial), Uber Technologies Inc. (UBER, Financial) and JD.com Inc. (JD, Financial).
Alight
Loeb invested in 17 million shares of Alight (ALIT, Financial), allocating 1.07% of the equity portfolio to the stake. The stock traded for an average price of $10.42 per share during the quarter.
The Las Vegas-based software company, which provides integrated, cloud-based human capital solutions for managing wealth and HR needs, has a $5.02 billion market cap; its shares were trading around $10.99 on Tuesday with a price-book ratio of 5.79.
Since going public via special purpose acquisition company in July, the stock has gained more than 20%.
After Blackstone Inc. (BX, Financial) acquired the record keeping and benefits company in 2017, the alternative investment management firm announced in January its plans to merge Alight Solutions with blank-check company Foley Trasimene Acquisition Corp. The deal officially closed in early July after receiving shareholders’ approval.
GuruFocus rated Alight’s financial strength 8 out of 10.
With a 3.72% stake, Loeb is the company’s largest guru shareholder. David Tepper (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also established positions in Alight.
Intel
The guru curbed the Intel (INTC, Financial) stake by 35.71%, selling 5 million shares. The transaction had an impact of -1.64% on the equity portfolio. Shares traded for an average price of $54.24 each during the quarter.
He now holds 9 million shares total, which account for 2.62% of the equity portfolio and is now his 10th-largest position. GuruFocus estimates Loeb has lost 10.27% on the investment so far.
The semiconductor chip manufacturer, which is headquartered in Santa Clara, California, has a market cap of $205.51 billion; its shares were trading around $50.49 on Tuesday with a price-earnings ratio of 9.81, a price-book ratio of 2.28 and a price-sales ratio of 2.65.
The GF Value Line shows the stock is fairly valued currently based on its historical ratios, past performance and future earnings projections.
Intel’s financial strength was rated 6 out of 10 by GuruFocus as it is being supported by a comfortable level of interest coverage as well as a high Altman Z-Score of 3.28 that indicates it is in good standing. The return on invested capital also overshadows the weighted average cost of capital, meaning value is being created as the company grows.
The company’s profitability fared better, scoring an 8 out of 10 rating as a result of operating margin expansion, strong returns on equity, assets and capital that outperform a majority of competitors as well as a moderate Piotroski F-Score of 6 out of 9, indicating business conditions are typical for a stable company. Despite recording consistent earnings and revenue growth over the past several years, Intel’s predictability rank of 3.5 out of five stars is on watch. According to GuruFocus, companies with this rank return an average of 9.3% annually over a 10-year period.
PRIMECAP Management (Trades, Portfolio) is Intel’s largest guru shareholder with a 0.89% stake. Other top guru investors include Ken Fisher (Trades, Portfolio), Seth Klarman (Trades, Portfolio), Chris Davis (Trades, Portfolio), Al Gore (Trades, Portfolio), Pioneer Investments, the Parnassus Endeavor Fund (Trades, Portfolio), Simons’ firm and Michael Price (Trades, Portfolio).
SoFi Technologies
After establishing a position in SoFi Technologies (SOFI ) in the second quarter, the investor dumped all 28.9 million shares, impacting the equity portfolio by -3.25%. The stock traded for an average per-share price of $15.70 during the quarter.
GuruFocus data shows Loeb lost an estimated 27.21% on the investment.
The San Francisco-based company, which provides personal financial services online, has a $17.56 billion market cap; its shares were trading around $21.80 on Tuesday with a price-book ratio of 4.36 and a price-sales ratio of 23.57.
Since its debut via SPAC at the beginning of June, the stock has fallen 3.75%.
SoFi announced in January its plans to combine with Social Capital Hedosophia Holdings Corp. V to become a publicly traded company. The deal closed in May.
GuruFocus rated SoFi’s financial strength 3 out of 10.
Of the gurus invested in SoFi, George Soros (Trades, Portfolio) has the largest holding with 0.02% of its outstanding shares. Louis Moore Bacon (Trades, Portfolio) and Simons’ firm also have positions in the stock.
Uber Technologies
Loeb exited his 8.35 million-share stake in Uber Technologies (UBER, Financial), which had an impact of -2.45% on the equity portfolio. The stock traded for an average price of $43.76 per share during the quarter.
GuruFocus says he lost an estimated 20.72% on the investment.
The ridesharing company headquartered in San Francisco, which also offers food and package delivery services, has a market cap of $89.07 billion; its shares were trading around $45.94 on Tuesday with a price-book ratio of 6.03 and a price-sales ratio of 5.48.
According to the GF Value Line, the stock is fairly valued currently.
GuruFocus rated Uber’s financial strength 4 out of 10. As a result of issuing approximately $5.1 billion in new long-term debt over the past three years, the company has poor interest coverage. The low Altman Z-Score of 1.54 also warns it could be at risk of going bankrupt if it does not improve its liquidity.
The company’s profitability did not fare as well, scoring a 1 out of 10 rating on the back of negative margins and returns that underperform a majority of industry peers. Uber has a low Piotroski F-Score of 3, indicating operations are in poor shape, and has recorded losses in operating income as well as declines in revenue per share over the past several years.
Frank Sands (Trades, Portfolio) is Uber’s largest guru shareholder with a 1.10% stake. Chase Coleman (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Philippe Laffont (Trades, Portfolio) and Cohen, among several other gurus, also have significant investments in the stock.
JD.com
Impacting the equity portfolio by -1.36%, the guru sold all 2.9 million shares of JD.com (JD, Financial). During the quarter, shares traded for an average price of $73.86 each.
He gained an estimated 38.19% on the investment according to GuruFocus.
The Chinese e-commerce company has a $132.57 billion market cap; its shares were trading around $85.58 on Tuesday with a price-earnings ratio of 24.52, a price-book ratio of 3.87 and a price-sales ratio of 1.03.
Based on the GF Value Line, the stock appears to be significantly overvalued currently.
JD.com’s financial strength was rated 7 out of 10 by GuruFocus, driven by adequate interest coverage and a high Altman Z-Score of 4.47. The ROIC, however, is eclipsed by the WACC, suggesting issues with creating value.
The company’s profitability did not fare as well, scoring a 4 out of 10 rating. Even though returns top over half of its competitors, the operating margin is underperforming versus other companies. JD.com also has a high Piotroski F-Score of 7, meanings business conditions are healthy.
Of the gurus invested in JD.com, Coleman has the largest stake with 3.29% of its outstanding shares. Davis, Dodge & Cox, Laffont, Andreas Halvorsen (Trades, Portfolio), Fisher, Pioneer Investments, Catherine Wood (Trades, Portfolio) and several other gurus also have large positions in the stock.
Additional trades and portfolio performance
Other new positions Loeb established during the quarter included Activision Blizzard Inc. (ATVI, Financial), Archaea Energy Inc. (LFG, Financial) and CF Industries Holdings Inc. (CF, Financial). He also added to his Amazon.com Inc. (AMZN, Financial) holding and cut down the Upstart Holdings Inc. (UPST, Financial) investment.
The guru’s $17.07 billion equity portfolio, which is composed of 125 stocks, is most heavily invested in the technology (27.52%) and financial services (22.21%) sectors.
The Third Point Offshore Fund posted a 20.5% return for full-year 2020, outperforming the S&P 500’s 18.4% return.
