Third Point leader Daniel Loeb (Trades, Portfolio) released his equity portfolio for the first quarter last 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 quarter, Loeb said, “Shorts and hedges have been a significant drag on performance, costing us approximately 4% in the first quarter.”
“Losses were both in single name shorts that skyrocketed in January, as well as baskets and indices hedging some of our largest positions,” he continued. “We have re-evaluated the risk and sizing guidelines around shorts, eliminating many of the technical factors that caused this underperformance, dampening the ‘basis risk’ and overall volatility from these efforts.”
He also wrote he sees “encouraging signs that inflation is moderating.”
Keeping these considerations in mind, the 13F filing showed the guru entered 14 new positions during the three months ended March 31, exited 11 stocks and added to or trimmed a slew of other existing investments. Notable trades included new holdings in Alphabet Inc. (GOOGL, Financial) and HCA Healthcare Inc. (HCA, Financial) as well as the divestment of SentinelOne Inc. (S, Financial), TJX Companies Inc. (TJX, Financial) and Ovintiv Inc. (OVV, Financial).
Investors should be aware 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.
Alphabet
The guru invested in 4.75 million Class A shares of Alphabet (GOOGL, Financial), dedicating 8.06% of the equity portfolio to the stake. The stock traded for an average price of $95.94 per share during the quarter.
He previously sold out of the stock in the first quarter of 2022. It is now his fifth-largest position.
The Mountain View, California-based communications services company, which owns the Google search engine, YouTube and a number of other businesses, has a $1.59 trillion market cap; its Class A shares were trading around $125.38 on Monday with a price-earnings ratio of 27.92, a price-book ratio of 6.11 and a price-sales ratio of 5.75.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings estimates.
At 99 out of 100, the GF Score indicates the company has high outperformance potential on the back of solid ratings for financial strength, profitability, growth, value and momentum.
Of the many gurus invested in Alphabet’s Class A stock, Ken Fisher (Trades, Portfolio) has the largest stake with 0.33% of its outstanding shares. PRIMECAP Management (Trades, Portfolio), Dodge & Cox, Chase Coleman (Trades, Portfolio), the Harbor Capital Appreciation Fund (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Philippe Laffont (Trades, Portfolio) and Hotchkis & Wiley, among others, also have notable positions in the stock.
HCA Healthcare
Loeb picked up 860,000 shares of HCA Healthcare (HCA, Financial), allocating 3.71% of the equity portfolio to the position. Shares traded for an average price of $254.01 each during the quarter.
It is now his ninth-largest holding.
The company headquartered in Nashville, Tennessee, which owns and operates health care facilities across the U.S., has a market cap of $76.92 billion; its shares were trading around $279.62 on Monday with a price-earnings ratio of 14.02 and a price-sales ratio of 1.33.
According to the GF Value Line, the stock is fairly valued currently.
The company has good outperformance potential with a GF Score of 90, driven by high ratings for profitability, growth and momentum, middling marks for financial strength and a low value rank.
First Eagle Investment (Trades, Portfolio) is the largest guru shareholder of HCA with a 1.67% stake. The Vanguard Health Care Fund (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio) and Nygren also have significant holdings.
SentinelOne
The investor exited his 14.70 million-share stake in SentinelOne (S, Financial), which had an impact of -3.60% on the equity portfolio. During the quarter, the stock traded for an average per-share price of $15.10.
GuruFocus estimates Loeb lost 54.84% on the investment over its lifetime. It was previously his ninth-largest holding.
The Mountainview, California-based company, which offers artificial intelligence-powered solutions to prevent, detect and fight cyberattacks on a single autonomous XDR platform, has a $5.51 billion market cap; its shares were trading around $19.08 on Monday with a price-book ratio of 3.30 and a price-sales ratio of 12.60.
Since its initial public offering in June 2021, the stock has tumbled around 55%.
With a high financial strength rank and low profitability rating, the GF Score of 20 implies it has poor performance potential. Due to not receiving ratings for the other three criteria, however, the score may not reflect the company’s true prospects.
With a 0.99% stake, Jim Simons (Trades, Portfolio)’ Renaissance Technologies is SentinelOne’s largest guru shareholder. Steven Cohen (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Coleman also own the stock.
TJX Companies
The guru dumped all 2.65 million shares of TJX Companies (TJX, Financial), impacting the equity portfolio by -3.54%. The stock traded for an average price of $78.68 per share during the quarter.
Formerly his 10th-largest position, GuruFocus data shows Loeb gained 18.22% on the investment.
The retailer of off-price apparel and home goods, which is headquartered in Framingham, Massachusetts, has a market cap of $91.42 billion; its shares were trading around $79.39 on Monday with a price-earnings ratio of 26.64, a price-book ratio of 14.41 and a price-sales ratio of 1.89.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 84 means the company has good outperformance potential due to high ratings for profitability, financial strength and momentum as well as more moderate growth and value ranks.
Holding a 1.22% stake, PRIMECAP is the largest guru shareholder of TJX. Jeremy Grantham (Trades, Portfolio), Harbor Capital, Simons’ firm the Scotia Canadian Dividend Fund (Trades, Portfolio) and the T Rowe Price Equity Income Fund (Trades, Portfolio) are also notable investors.
Ovintiv
Loeb sold his remaining 4 million shares of Ovintiv (OVV, Financial). The transaction had an impact of -3.40% on the equity portfolio. During the quarter, shares traded for an average price of $44.11 each.
GuruFocus found he lost around 6.31% on the investment.
The Denver-based oil and gas producer has an $8.54 billion market cap; its shares were trading around $34.94 on Monday with a price-earnings ratio of 2.05, a price-book ratio of 1.08 and a price-sales ratio of 0.67.
The GF Value Line suggests the stock is significantly undervalued currently.
The GF Score of 76 indicates the company is likely to have average performance going forward. While it has high ratings for profitability and value, the momentum, growth and financial strength ranks were more moderate.
Dodge & Cox is Ovintiv’s largest guru shareholder with an 11.05% stake. The stock is also being held by Hotchkis & Wiley, the Smead Value Fund (Trades, Portfolio), Grantham, Fisher, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates and several others.
Additional trades and portfolio performance
Other new positions Loeb established during the quarter were in Salesforce Inc. (CRM, Financial) and Alibaba Group Holding Ltd. (BABA, Financial). He also cut back his UnitedHealth Group Inc. (UNH, Financial) and American International Group Inc. (AIG, Financial) holdings. The DuPont de Nemours Inc. (DD, Financial) investment was increased.
The guru’s $6.11 billion equity portfolio, which is composed of 46 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.
