Daniel Loeb (Trades, Portfolio), who seeks “compounders of value,” purchased seven stocks in the third quarter, according to his filings released on Friday.
Loeb, founder of hedge fund Third Point, started positions in: American Express Co. (AXP, Financial), Arco Platform Ltd. (ARCE, Financial), Diamondback Energy Inc. (FANG, Financial), IQVIA Holdings Inc. (IQV, Financial), Merck & Co. Inc. (MRK, Financial), Shire PLC (SHPG, Financial) and WPX Energy Inc. (WPX, Financial). The seven stocks made it the slowest quarter for buying for Third Point since 2015, as the S&P 500 index climbed more than 7%. Loeb’s Third Point Offshore Fund posted a 0.7% gain for the year through the end of September, underperforming the 10.6% jump in the index.
Loeb seemed to put the third quarter behind him though in his shareholder letter last week, instead addressing the reasons for the October sell-off that sent his fund to a 6.3% loss for the year and dropped the S&P 500’s gain to 3%.
“It always seems like the perfect storm in hindsight. Weakening earnings plus trade war escalation plus a potentially overzealous Fed was a toxic combination, particularly for cyclical,” Loeb wrote.
Loeb said that going forward, he expected current above-trend growth in the U.S. economy slowing but did not see signs of an impending recession as financial balance remained and inflation held in check. While saying it was “important to stay balanced and not get overly negative,” Loeb cautioned that the consensus earnings-per-share growth estimate of 10% was probably too optimistic.
As a result, Loeb said Third point had deleveraged its portfolio, cut exposure to the tech sector and increased its short positioning. But it would not withdraw from the markets. In the fourth quarter, the firm has been “doubling down on finding quality-driven ideas, namely those with strong relative growth prospects, solid financial returns, and appealing relative valuation vis”à ”vis their cash flows, peers, or the market.”
At third quarter-end, Loeb’s public long portfolio listed 31 stocks, valued at $14.31 billion. The largest sector represented was health care at 27.7% of its holdings, followed by industrials at 25.8% of the portfolio.
Loeb founded the event-driven value firm in 1996 and achieved an annualized return of 14.8% versus 8.0% for the S&P 500.
New buys
American Express Co. (AXP, Financial)
Loeb purchased 5 million shares of American Express, giving it 3.72% portfolio weight. The stock’s third-quarter share price averaged $104.
American Express Co. has a market cap of $92.14 billion; its shares were traded around $107.86 Tuesday with a price-earnings ratio of 25.56 and price-sales ratio of 3.56. The trailing 12-month dividend yield of American Express Co. is 1.33%. The forward dividend yield of American Express Co. is 1.46%.
Arco Platform Ltd. (ARCE, Financial)
Loeb purchased 250,000 shares of Arco Platform, giving it 0.4% portfolio weight. The stock’s third-quarter share price averaged $23.
Arco Platform Ltd. has a market cap of $234.210 million; its shares were traded around $21.08 Tuesday with a price-earnings ratio of 14.06 and price-sales ratio of 3.16.
Diamondback Energy Inc. (FANG, Financial)
Loeb purchased 500,000 shares of Diamondback Energy, giving it 0.47% portfolio weight. The stock’s third-quarter share price averaged $128.
Diamondback Energy Inc. has a market cap of $10.92 billion; its shares were traded around $107.85 Tuesday with a price-earnings ratio of 16.32 and price-sales ratio of 5.50. The trailing 12-month dividend yield of Diamondback Energy Inc. is 0.23%. The forward dividend yield of Diamondback Energy Inc. is 0.45%.
IQVIA Holdings Inc. (IQV, Financial)
Loeb purchased 1.5 million shares of IQVIA Holdings, giving it 1.36% portfolio weight. The stock’s third-quarter share price averaged $120.
IQVIA Holdings Inc. has a market cap of $24.21 billion; its shares were traded around $119.66 Tuesday with a price-earnings ratio of 21.11 and price-sales ratio of 2.46. IQVIA Holdings Inc. had an annual average earnings growth of 13.50% over the past five years.
Merck & Co. Inc. (MRK, Financial)
Loeb purchased 4.5 million shares of Merck & Co., giving it 2.23% portfolio weight. The stock’s third-quarter share price averaged $67.
Merck & Co. Inc. has a market cap of $194.46 billion; its shares were traded around $74.61 Tuesday with a price-earnings ratio of 59.68 and price-sales ratio of 4.84. The trailing 12-month dividend yield of Merck & Co. Inc. is 2.59%. The forward dividend yield of Merck & Co. Inc. is 2.95%.
Loeb purchased 1.6 million shares of Shire PLC, giving it 2.03% portfolio weight. The stock’s third-quarter share price averaged $173.
Shire PLC has a market cap of $55.14 billion; its shares were traded around $180.86 Tuesday with a price-earnings ratio of 11.85 and price-sales ratio of 3.64. The trailing 12-month dividend yield of Shire PLC is 0.58%. The forward dividend yield of Shire PLC is 0.58%. Shire PLC had an annual average earnings growth of 19.3% over the past 10 years. GuruFocus rated Shire PLC the business predictability rank of 4.5-star.
WPX Energy Inc. (WPX, Financial)
Loeb purchased 3,135,900 shares of WPX Energy, giving it 0.44% portfolio weight. The stock’s third-quarter share price averaged $19.
WPX Energy Inc. has a market cap of $5.97 billion; its shares were traded around $14.20 Tuesday with a price-sales ratio of 2.50.
See Daniel Loeb (Trades, Portfolio)’s portfolio here.
