Third Point leader Daniel Loeb (Trades, Portfolio) released his equity portfolio for the fourth quarter of 2022 earlier this week.
Picking stocks using an event-driven, value-oriented approach, the guru’s New York-based firm is known for entering activist positions in underperforming companies with a catalyst that will help unlock value for shareholders.
In his shareholder letter for the fourth quarter, Loeb said Third Point “used market weakness to bring up our exposures, initiate several new positions, and add to others that traded to attractive levels.”
“We are looking for companies making significant share repurchases, planning to unlock value via a spin-off, or improving a muddied narrative after being born out of bankruptcy,” he wrote.
Keeping these considerations in mind, the 13F filing showed the guru entered five new positions during the three months ended Dec. 31, exited 18 stocks and added to or trimmed a slew of other existing investments. Notable trades included new holdings in American International Group Inc. (AIG, Financial), Microsoft Corp. (MSFT, Financial) and International Flavors & Fragrances Inc. (IFF, Financial), a boost to the Bath & Body Works Inc. (BBWI, Financial) stake and the divestment of EQT Corp. (EQT, Financial). The Twitter Inc. (TWTR, Financial) holding was also dissolved after the company was taken private by Elon Musk in October.
Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
American International Group
Loeb invested in 5.1 million shares of American International Group (AIG, Financial), allocating 5.41% of the equity portfolio to the stake. The stock traded for an average price of $58.19 per share during the quarter. He previously sold out of the stock in 2015.
It is now his sixth-largest position.
Also known as AIG, the New York-based insurance company has a $46.37 billion market cap; its shares were trading around $62.42 on Thursday with a price-earnings ratio of 3.72, a price-book ratio of 1.20 and a price-sales ratio of 0.85.
The GF Value Line suggests the stock is modestly overvalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 68 out of 100, the GF Score indicates the company has poor future performance potential. While it received a high rating for momentum, the profitability, growth and financial strength ranks were more moderate and GF Value was low.
Of the gurus invested in AIG, Diamond Hill Capital (Trades, Portfolio) has the largest stake with 1.93% of outstanding shares. Hotchkis & Wiley, Richard Pzena (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, the T Rowe Price Equity Income Fund (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio) and several other gurus also have significant positions in the stock.
Microsoft
After selling out in the second quarter, the guru picked up 1.18 million shares of Microsoft (MSFT, Financial), dedicating 4.75% of the equity portfolio to the position. Shares traded for an average price of $239.99 each during the quarter.
It is now his seventh-largest holding.
The software company headquartered in Redmond, Washington, which is known for its Windows operating system and Office suite of products, has a market cap of $1.98 trillion; its shares traded around $266.08 on Thursday with a price-earnings ratio of 29.56, a price-book ratio of 10.82 and a price-sales ratio of 9.76.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 95 means the company has high outperformance potential, driven by strong ratings for four of the criteria and a more moderate momentum rank.
With a 0.53% stake, Bill Gates (Trades, Portfolio)’ foundation trust is Microsoft’s largest guru shareholder. Other top guru investors include Ken Fisher (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Dodge & Cox, Baillie Gifford (Trades, Portfolio), the late Spiros Segalas’ Harbor Capital Appreciation Fund (Trades, Portfolio) and Chase Coleman (Trades, Portfolio).
International Flavors & Fragrances
The investor entered a 2.3 million-share stake in International Flavors & Fragrances (IFF, Financial), giving it 4.04% space in the equity portfolio. During the quarter, the stock traded for an average per-share price of $98.31.
It is now his eighth-largest position.
The New York-based company, which produces flavors, fragrances and cosmetic actives for a number of end markets, has a $24.69 billion market cap; its shares were trading around $96.83 on Thursday with a price-book ratio of 1.39 and a price-sales ratio of 1.97.
Based on the GF Value Line, the stock appears to be modestly undervalued currently.
The GF Score of 74 indicates the company is likely to have average performance going forward on the back of high ratings for profitability, GF Value and momentum, middling marks for financial strength and a low growth rank.
Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder with a 1.21% stake. First Pacific, Steven Romick (Trades, Portfolio) and the T. Rowe Price Equity Income Fund also have positions in International Flavors & Fragrances.
Bath & Body Works
Loeb increased his Bath & Body Works (BBWI, Financial) investment by 69.02%, buying 5.62 million shares. The transaction had an impact of 3.97% on the equity portfolio. The stock traded for an average price of $37.28 per share during the quarter.
He now holds 13.75 million shares in total. Occupying 9.72% of the equity portfolio, it is the guru’s fourth-largest holding. GuruFocus estimates Loeb has gained 18.65% on the investment so far.
The specialty retail company headquartered in Columbus, Ohio, which is known for its variety of soaps, lotions, fragrances and candles, has a market cap of $9.80 billion; its shares were trading around $42.93 on Thursday with a price-earnings ratio of 11.18 and a price-sales ratio of 1.34.
The GF Value Line suggests the stock is modestly undervalued currently.
The company is likely to have average performance going forward with a GF Score of 76. It received high points for profitability, GF Value and momentum, middling marks for financial strength and a low grade for growth.
Of the gurus invested in Bath & Body Works, Steve Mandel (Trades, Portfolio) has the largest stake with 9.03% of its outstanding shares. PRIMECAP Management (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also have notable holdings.
EQT
Impacting the equity portfolio by -2.40%, Loeb dumped the 3.25 million remaining EQT (EQT, Financial) shares. During the quarter, shares traded for an average price of $40.14 each.
GuruFocus data shows he gained an estimated 61.19% on the investment over its lifetime. It was previously his 10th-largest position.
The Pittsburgh-based oil and gas producer has an $11.93 billion market cap; its shares were trading around $32.50 on Thursday with a price-earnings ratio of 7.19, a price-book ratio of 1.24 and a price-sales ratio of 1.053.
According to the GF Value Line, the stock is significantly overvalued currently.
The GF Score of 64 suggests the company has poor future performance potential. It received moderate ratings four of the criteria and a low rank for GF Value.
With 0.69% of outstanding shares, David Tepper (Trades, Portfolio) is EQT’s largest guru shareholder. Other guru investors include Simons’ firm, David Nierenberg (Trades, Portfolio), Ronald Muhlenkamp (Trades, Portfolio), Arnold Van Den Berg (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Joel Greenblatt (Trades, Portfolio) and Azvalor Managers FI (Trades, Portfolio).
Additional trades and portfolio performance
Other new positions Loeb established during the quarter were in Fidelity National Information Services Inc. (FIS, Financial) and Laboratory Corp of America Holdings (LH, Financial). He also cut back his Ventyx Biosciences Inc. (VTYX, Financial) and SentinelOne Inc. (S, Financial) holdings.
The guru’s $5.96 billion equity portfolio, which is composed of 43 stocks, is most heavily invested in the health care, utilities and consumer defensive sectors.
Third Point posted a return of -21.7% for 2022, underperforming the S&P 500’s -18.11% return.
