Dan Loeb’s Third Point Offshore Fund rebounded sharply in November, revealing an unusual level of detail about its performance.
The multistrategy hedge fund posted a strong 3 percent gain for the month, boosting this year’s net return to 14.6 percent, according to its latest monthly report. Still, Third Point greatly lags the S&P 500, which surged 27.6 percent in the first 11 months of the year.
Third Point’s November report provides much more detail than the firm had previously been sharing with investors. For the first time, Third Point drills further down into the equity book.
The firm said the fund generated a 3.3 percent gross return in November, including a 2 percent gross return from equities that was driven by a 4 percent gain in the long book and offset by a 2 percent loss in the short book.
Inside equities, Third Point said its activism positions produced a 1.4 percent return — virtually all of the gain coming on the long side — while “fundamental and event” driven bets kicked in a 0.8 percent gain. The fund suffered a small loss from portfolio hedges. For the year to date, activism accounted for 15.3 percentage points of the fund’s 16.4 percent gross return, according to the report.
Third Point reported a 0.87 percent gross gain from its credit book. Again, the firm breaks down the strategy’s portfolio, noting that most of the gain came from “corporate and sovereign” positions and a small gain came from structured credit.
Private investments kicked in a strong 0.6 percent gross gain for the month and 1.4 percent for the year.
Health care giant Baxter International and Japanese conglomerate Sony Corp. were among Third Point’s five biggest winners in November and for the year. The other three biggest winners for the month were managed care company Centene, retailer Burlington Stores, and embattled utility Pacific Gas & Electric Co.
Rounding out the top winners for the year are Swiss food and beverage giant Nestlé, food giant Campbell Soup Co., and industrial conglomerate United Technologies.
Four of Third Point’s five biggest losers for the month were individual, undisclosed short positions.
Heading into December, Third Point turned sharply more bullish. Its equity book is nearly 60 percent net long, way up from 39 percent the previous month. The biggest difference is the hedge fund sharply cut back on its short book.
Healthcare and financial stocks together represent roughly half of Third Point’s net long exposure. Its top gross longs are Sony, Baxter, Nestle, United Technologies and EssilorLuxottica.
This is the second straight month EssilorLuxottica, the world’s largest eye-care company, ranks among the top five longs. In its third-quarter letter published October 24, Third Point told clients it held a $700 million stake in the company, which it purchased in early 2019.
The eye-care business was created in late 2018 through the merger of Essilor, known for its ophthalmic lenses, and Luxottica, a major maker of eyeglass frames and sunglasses.
“The pro forma company has the industry’s only vertically integrated business model from design to manufacturing to retail sales,” Third Point said in the letter. “The logic behind the merger was elegant: combining frames and lenses allows the company to control the entire eyewear value chain and transform an antiquated industry structure. Both consumers and shareholders should reap the benefits.”