Daniel Loeb has been one of the most successful money managers of the last two decades generating impressive returns that have been put him at number 240 on the Forbes top 400 wealth list. He is the founder and chief executive of the $11.9 billion Third Point LCC a hedge fund that has consistently outperformed average hedge fund portfolios and S&P 500 benchmarks.
At the end of the last quarter Third Point LLC reported year to date returns of 14.5% for its Offshore Fund and 23.0% for its Ultra Fund beating average hedge fund returns of 5.9% and S&P returns of 14.2% over the same period. His investment strategy entails shareholder activism which “employs a flexible, opportunistic investment style” and a “focus on delivering exceptional risk adjusted returns with limited market exposure.”
From 13F forms filed with the SEC we can now see the fund’s trades for the quarter ending September 30. Notable moves include trades in some of the largest and best known tech companies such as Alibaba Group (NYSE:BABA), Alphabet Inc (NASDAQ:GOOGL), and Facebook Inc (NASDAQ:FB). These companies have all done well with recent quarterly profits beating expectations- so let’s take a closer look at these trades now:
In Q3 Third Point LLC increased their holdings in Chinese e-commerce giant Alibaba by 46.67% to $1.14 billion- now the fund’s second-largest holding. This turned out to a very wise move as Alibaba experienced a 54% increase in revenue in the last quarter. The stock’s revenue got a big boost on Singles’ day, a Chinese holiday created as an opportunity for single people to celebrate their independence by buying themselves a gift. This year Alibaba recorded massive sales of $25 billion in just 24 hours, easily beating its performance in previous years.
Overall the company has the double benefit of the increased strength of Chinese domestic spending and the growth in their cloud computing services. According to TipRanks there is a strong buy consensus with all 18 analysts tracking the stock taking a buy position. The average analyst price target for BABA is $209.40 which suggests big upside of 13.29% from the current price of $184.90.
Third point LLC moved against generally bullish sentiment towards GOOGL by slashing its Alphabet Inc holding by a whopping -45.22% in the last quarter. Following the cut the fund’s remaining GOOGL position stands at $306 million.
During the last quarter the cloud computing sector saw some major changes with Google office suite partnering with Salesforce’s core platform and the announcement that Google Analytics will be integrated into Salesforce marketing software. The synergy is apparent as Google extends their reach into business software and Salesforce gets access to Google’s vast data and cloud resources. Google stock has performed remarkably well in the last year. Total Revenue was up 24% year-over-year to $27.77 billion, beating Wall Street analysts’ expectations of $27.2 billion and earning earnings were $9.57 per share, which also beat projections of $8.33 per share. TipRanks tracking reveals that 23 out of 26 analysts have published buy recommendation on GOOGL over the last three months.
Facebook has also seen significant growth over the past year. At the end of the Q3 2017 reported Net Income increased by 79% over the year-to-year period. At TipRanks there is a strong buy sentiment as 29 out of 31 analysts maintain a buy rating. However, Loeb reduced his exposure to Facebook by -2.86% in the last quarter to $580 million. Despite the cut, FB is still the fund’s fourth biggest holding and has already gained close to 5% since the filing.
Following very strong third quarter results, Wedbush analyst says Michael Pachter says: “We expect Facebook to continue its rapid growth overseas and to increase monetization of under-penetrated Instagram, WhatsApp, and Messenger over the coming years. We view Facebook as well-positioned to defend itself from competition for user mindshare and attention from other apps, as its initiatives around the camera and augmented reality can leverage its massive user base and suite of applications to streamline adoption and drive higher engagement.” Pachter has a buy rating on FB and a bullish $230 price target.