Third Point leader Daniel Loeb (Trades, Portfolio) disclosed earlier this week he upped his stake in Cano Health Inc. (CANO, Financial) by 1.91% after seeing the stock lose more than half its value since going public via special purpose acquisition company last summer.
Using an event-driven, value-oriented approach to stock picking, the guru's New York-based hedge fund is known for taking activist positions in underperforming companies with a catalyst that will help unlock value for shareholders.
According to GuruFocus Real-Time Picks, a Premium feature, Loeb invested in 215,808 shares of the Miami-based health care company on March 1, impacting the equity portfolio by 0.01%. Shares traded for an average price of $5.35 each on the day of the transaction.
He now holds a total of 11.5 million shares, which occupy 0.43% of the equity portfolio. GuruFocus estimates Loeb has lost 51.29% on the investment since establishing it in the second quarter of 2021.
The company, which operates primary care centers and supports affiliated medical practices that specialize in primary care for senior citizens, has a $1.13 billion market cap; its shares were trading around $6.23 on Thursday with a price-book ratio of 2.58 and a price-sales ratio of 0.66.
In a 13D filing with the SEC, Loeb noted that while he has “confidence” in Cano Health’s operating strategy and management team, he is not pleased with its performance. Since going public via SPAC in June, Cano Health’s shares have deteriorated, falling over 50%.
The stock did briefly rise after the news of Loeb’s increased investment broke, however.
According to the guru, Cano’s sluggish stock price is related to the fact investors have “a largely unfavorable view” of companies taken public through SPACs.
As a result, Loeb encouraged the company’s board to put it up for sale or explore other strategic alternatives. While his firm is not currently seeking board seats, the filing indicated that could change if Cano fails to address the “value gap” between its share price and intrinsic value.
In late February, Cano Health delayed the release of its fourth-quarter and full-year 2021 results due to identifying “certain potential non-cash adjustments to account for revenue recognition” while finalizing its audit. It is now expected to disclose them on or before March 16.
GuruFocus rated Cano’s financial strength 4 out of 10 and its profitability 2 out of 10.
With a 6.4% stake, Loeb’s Third Point is now the company’s third-largest institutional shareholder behind FMR LLC and Vanguard Group Inc. Among the gurus, Lee Ainslie (Trades, Portfolio) also has a sizeable position.
Portfolio composition and performance
The guru's $14.32 billion equity portfolio, which was composed of 91 stocks as of the end of the fourth quarter, is most heavily invested in the tech, consumer cyclical and health care sectors.
Other health care stocks he held as of Dec. 31, according to the 13F filing, included Danaher Corp. (DHR, Financial), UnitedHealth Group Inc. (UNH, Financial), Iqvia Holdings Inc. (IQV, Financial), Catalent Inc. (CTLT, Financial), Align Technology Inc. (ALGN, Financial), Ventyx Biosciences Inc. (VTYX, Financial) and Sema4 Holdings Corp. (SMFR, Financial).
Third Point posted a return of 22.9% for 2021, underperforming the S&P 500’s 28.7% return.
