Daniel Loeb (Trades, Portfolio), founder of Third Point Capital Management, disclosed last week that his top five new buys during the third quarter were Allergan PLC (AGN, Financial), Fidelity National Information Services Inc. (FIS, Financial), Five Below Inc. (FIVE, Financial), HD Supply Holdings Inc. (HDS, Financial) and Zendesk Inc. (ZEN, Financial).
Managing a portfolio of 40 stocks, Loeb follows an event-driven, value-oriented investment style. Loeb said in his quarterly shareholder letter that Third Point has followed this strategy since its founding in 1995.
Loeb said activism can allow Third Point to “create [the firm’s] own catalyst” in concentrated positions where the firm has a “differentiated view” of the company’s potential value based on its intervention. The fund manager further added that the firm currently has approximately 40% of its equity portfolio in activist names, “the highest in the firm’s history.” As of quarter-end, Third Point’s $8.42 billion equity portfolio’s top three sectors in terms of weight were health care, technology and financial services.
Loeb purchased 3.6 million shares of Allergan, giving the stake 7.20% weight in the equity portfolio. Shares averaged $162.97 during the quarter.
The Coolock, Dublin-based company manufactures drugs for aesthetics, ophthalmology, women’s health, gastrointestinal and central nervous system products. GuruFocus ranks Allergan’s financial strength 4 out of 10: Although the company has a solid Piotroski F-score of 6, it has a weak Altman Z-score of 0.87 and debt ratios that underperform 60.57% of global competitors.
Jim Simons (Trades, Portfolio)’ Renaissance Technologies and John Paulson (Trades, Portfolio) also have holdings in Allergan. On the other hand, Baupost manager Seth Klarman (Trades, Portfolio) closed his position during the quarter.
Fidelity National Information Services
Loeb purchased 2,499,989 shares of Fidelity National Information Services, giving the position 3.94% weight in the equity portfolio. Shares averaged $132.74 during the quarter.
The Jacksonville, Florida-based company provides processing software for capital markets providers, asset managers and custodians. GuruFocus ranks the company’s profitability 8 out of 10: Operating margins are outperforming 82.82% of global competitors despite contracting approximately 1.3% per year on average over the past five years.
Loeb purchased 850,000 shares of Five Below, giving the holding 1.27% weight in the equity portfolio. Shares averaged $121.53 during the quarter.
The Philadelphia-based company operates over 600 discount and variety stores, tailoring to teen and preteen customers. GuruFocus ranks Five Below’s profitability 8 out of 10 on several positive investing signs, which include operating margins that have increased approximately 3.40% per year on average over the past five years and are outperforming over 84% of global competitors.
HD Supply Holdings
Loeb purchased 1 million shares of HD Supply, giving the position 0.47% weight in the equity portfolio. Shares averaged $39.22 during the quarter.
The Atlanta-based company operates two industrial distribution channels: facilities and home improvement MRO, and specialty construction. According to GuruFocus, HD Supply’s operating margin and return on equity are outperforming over 87% of global competitors, suggesting good profitability.
Loeb purchased 500,000 shares of Zendesk, giving the position 0.43% weight in the equity portfolio. Shares averaged $82.50 during the quarter.
The San Francisco-based company offers software-as-a-service solutions to facilitate the integration of applications and functionality into websites and mobile applications. GuruFocus ranks Zendesk’s financial strength 5 out of 10: Although the company has a strong Altman Z-score of 4.66 and a solid Piotroski F-score of 5, itsÂ debt ratios are underperforming over 88% of global competitors.
Disclosure: No positions.
Read more here:
- Top 5 Buys of John Rogers’ Ariel Investment
- Leon Cooperman’s Top 5 Buys of the 3rd Quarter
- Bridgewater’s Top 5 New Buys in the 3rd Quarter
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