Is Dan Loeb losing his edge? I don’t mean his investment edge. He’s doing just fine in that department.
In July, he posted a 3.2 percent return in his $1.86 billion Third Point Offshore Fund, Ltd., boosting his 2010 return to 13.7 percent. Not many other hedge fund managers can make this claim. And, yes, he shrewdly racked up gains from two auto-related companies — Delphi and Chrysler — a natural gas company, and some short position whose name he would not divulge to investors. But, this is boring stuff.
You see, Loeb is best known for his sometimes antagonistic, in-your-face activist positions. Never mind that they rarely account for a majority of his portfolio. This is the stuff that landed Loeb on the hedge fund map and why we love him so much. Otherwise, he would just be another boring, successful, rich hedge fund manager.
Loeb-ophiles live for his eloquent letter-writing ability. Who can ever forget his letter to the Board of Directors of Salton, Inc. and its CEO, Leonhard Dreimann, when Loeb wrote: “What is most astounding about the company’s apparent death spiral is Mr. Dreimann’s inexplicably insouciant attitude and the fact that he remains in charge.”
After lambasting the company for spending huge sums to advertise at the U.S. Open, Loeb wrote: “What is equally shocking as Mr. Dreimann’s poor management, behavior and the fact that he is awarded anything more than subway tokens for his transportation needs is that this Board of Directors has sat idly by while he lays waste to this Company.” This is good stuff.
Then there was the February 2005 letter to Irik P. Sevin Chairman, President and CEO Star Gas Partners L.P., where Loeb asserted: “Your ineptitude is not limited to your failure to communicate with bond and unit holders. A review of your record reveals years of value destruction and strategic blunders which have led us to dub you one of the most dangerous and incompetent executives in America.” See what I mean?
In June 2006, he and one of his analysts quit the Board of Massey Energy, citing the board’s “misguided insistence on keeping” Don Blankenship as chief executive. Ah, to think he never won a Pulitzer prize.
He also was not shy about taking on fellow hedgies. When Citadel’s Ken Griffin recruited one of Loeb’s top people, Loeb fired off a letter stating: “Should you attempt to hire people from them I will consider it a similar act of war. My friends’ enemies become my enemies.” He also told Griffin: “There is little I enjoy as much as watching you from afar as your reputation and ‘organization’ declines as the same rate as your falling returns.”
Letter writing is not Loeb’s only passion. During the early days of the dot-com craze, Loeb even resorted to using the handle, Mr. Pink, to tout stocks on the pioneering Website Silicon Investor. This is the stuff Loeb-ophiles live for. Unlike other hedgies, Loeb also seems to find a way to get into the tabloid press. This is how we know several years ago he shelled out $45 million for a 10,000 square foot penthouse on Central Park West, around the same time he sold a West Village townhouse for $12 million.
So, enough with this outperformance and deft investment selection. Show some skin in the game. Tell the CEO of Chrysler you’re not only glad you made money from its turnaround, but that it’s about time they stopped ripping off American taxpayers, or something like that.
Tell Eddie Lampert to donate several hundred crappy Sears stores no one shops in anymore to Warren Buffett and Bill Gates and their charity crusade.
Otherwise, Dan, you’re boring me.
