Billionaire Dan Loeb Buys Back Into Apple, Adds Alibaba, Visa, More - InvestingChannel

Billionaire Dan Loeb Buys Back Into Apple, Adds Alibaba, Visa, More

Daniel Loeb is the the founder of Third Point LLC, a New York-based hedge fund focused on event-driven, value-oriented investing fund. Dan Loeb founded the firm in 1995 and currently leads the portfolio management, risk management and research activities of Third Point LLC. Loeb’s “preferred strategy” is to buy into troubled companies, replace inefficient management and return the companies to profitability. The fund had over $10 billion in assets under management (AUM) at the end of the second quarter of 2016. In the article below we discuss some of the new positions taken by Third Point LLC, as well as the stocks where Dan Loeb has added more shares during the third quarter.

Third Point returned about 5% during the third quarter, outpacing the S&P 500 Index by 1%. The long/short equity fund manager is still concerned about China. “While China has fallen temporarily off the radar screen, we still see reasons for concern. The stabilization in economic activity has come at the cost of increasing leverage and a potentially overheated housing market. Political change next year may also result in increased volatility,” Loeb said in his third quarter investor letter. Despite these concerns Loeb initiated large new positions in Apple Inc. (NASDAQ:AAPL) and Alibaba Group Holding Ltd. (NYSE:BABA). Loeb was also concerned about growth rates in the US though his following views were expressed before Donald Trump’s election victory:

“We are clearly in the late stages of a business cycle following an eight year (tepid) expansion. While we do not forecast a financial crisis or a recession, a clear path to growth seems elusive. Consumers have been reducing spending and businesses have never regained their pre-2008 capital investment levels. We might soon long for 2% GDP growth. Earnings have stalled for a few years and while this can be partially explained by falling oil prices, a strong dollar, weak global growth, and flat margins, earnings estimations may be inflated at these levels. This last observation dovetails with both the opportunity and the challenge we face investing today. We have seen a return to a “stock-pickers” market this year. However, that term does not mean what it did fifteen or twenty years ago when we were in our infancy. Then, picking stocks could be done in a virtual bubble and all of our time was spent deep in financial statements. While our analyst team still spends the vast majority of its workday analyzing fundamentals, getting overall portfolio positioning right is equally essential to generating returns. The macro considerations discussed above must be interpreted correctly and applied successfully. When we add in the use of data sets and “quantamental” techniques that are increasingly important to remain competitive while investing in single-name equities, it is clear that our business is rapidly evolving.”

Top 10 Online Shopping Sites in the US

Third Point has increased its holdings in Apple Inc. (NASDAQ:AAPLto 2.5 million shares by the end of the third quarter valued at $282 million. Though the stock performance has been lackluster over the last one year, the company still owns a massive cash generating machine in the form of its iTunes service. Also iPhones continue to be the best selling smartphone amongst consumers globally. The company gives a decent dividend yield of 2.1% and has also returned billions of dollars to shareholders in the form of buybacks. It holds a substantial portion of its cash hoard in overseas locations and if a tax break is given by the Trump administration, it may increase its dividends even further. The company is entering new segments such as payments processing (Apple Pay) and electronics watches (Apple Watch). The world’s most valued company with a market value of more than $562 billion, saw its hedge fund holding increase to $16.22 billion in the third quarter from $10.67 billion in the quarter earlier.

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Third Point held nearly 2.6 million shares of Alibaba Group Holding Ltd. (NYSE:BABA) at the end of the third quarter, worth $275 million. This company is the world’s second largest online retailer with a market value of $224 billion. Alibaba Group Holding Ltd. (NYSE:BABA) owns some of the top online properties in China such as the retail online shopping destination (Taobao Marketplace) and retail platform (Tmall), besides global consumer marketplace targeting consumers (AliExpress). This stock has given a good return of 11% over the last one year. The company is the dominant online player in the country with the greatest number of internet users and showed a turnover of more than 100 billion yuan last year. About 35 out of the 43 analysts covering the stock have rated it as a “buy”.

The company reported that its sales had already exceeded more than $15 billion during the first 20 hours of the “Singles Day” shopping festival in China. As per our records, the number of funds having Alibaba Group Holding Ltd. (NYSE:BABA) in their portfolio increased to 104 in the third quarter from 69 in the earlier quarter. The value of their holdings also appreciated to $8.26 billion from $5.51 billion quarter over quarter. Alibaba also ranked #1 among the tech stocks snapped by billionaires during the third quarter.

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Humana Inc. (NYSE:HUM) is another stock in which Third Point initiated a new position during the third quarter and held 1.4 million shares worth $247 million. This company is in the health and well-being segment providing services such as pharmacy solutions, provider services, home-based services and clinical programs. It also markets medicare benefits to individuals or directly via group accounts. The stock has returned around 9% over the last one year and trades at the top of its 52 week trading range. The company has a market value of $29 billion and has a trailing P/E of ~26x. About 8 out of the 16 analysts covering this stock have rated it as a buy. The average earnings estimate for Humana Inc. (NYSE:HUM) this year is $9.5 per share which is an increase of ~22% year on year. The company reported revenues of more than $13 billion during the third quarter with a return on equity (ROE) of 16.29%. Approximately 22% of the company’s float as of September 30th was held by 66 hedge funds from our database. The value of their holdings also increased to $5.94 million from $5.82 million quarter over quarter.

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4.25 million shares of Conagra Brands Inc. (NYSE:CAG) valued at $200 million were being held by Third Point by the end of quarter three. It is the owner of some top brands such as Healthy Choice, Slim Jim, Hebrew National, Orville Redenbacher’s, Peter Pan, Chef Boyardee, Egg Beaters, Rosarita, Fleischmann’s and Hunt’s. The stock is trading near the bottom of its 52 week price range, after falling by almost 14% over the last one year. The company gives a dividend yield of 2.86% and has a market value of $10.8 billion. Conagra Brands Inc. (NYSE:CAG) reported revenues of $2.67 billion during the third quarter with an operating margin of 16%. Analysts have an average rating of “overweight” for this stock. The company recently announced the spin-off of its subsidiary Lamb Weston Holdings Inc. (NYSE:LW) which is a supplier of frozen potato, sweet potato, appetizer and vegetable products. The world’s largest branded food supplier witnessed an increased interest from hedge funds. The number of funds that we track having Conagra Brands Inc. (NYSE:CAG) in their portfolio increased to 50 in the third quarter from 41 in the quarter earlier.

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Third Point took a new position in Visa Inc. (NYSE:V) and held 2.1 million shares worth $173.67 million during the third quarter. The company owns and operates one of the largest payments processing networks in the world providing its services to consumers, businesses, financial institutions and governments in over 200 countries for electronic payments. It has also started offering a suite of digital, e-commerce, person-to-person payments, and mobile products and services. The stock is currently trading very near the top of its 52 week trading range and it has a market capitalization of more than $190 billion. The company operates at very high margins as it managed to earn a net income of $6.3 billion on revenues of $13.9 billion in 2015. Approximately 94% of its total outstanding stock is held by institutions. Charles Scharf, its former CEO stepped down recently and was succeeded by former American Express Company (NYSE:AXP) President Alfred Kelly. The hedge funds held approximately 6% of the company’s outstanding stock as of September 30th. The number of these funds deccreased to 115 from 118 in the second quarter.

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