Dan Loeb’s Third Point hedge fund ended 2024 with a 25.6 percent gain, slightly besting a raging stock market in a comeback that has been picking up speed for the past two years.
Following the fund’s 21.8 percent loss in 2022, Third Point only gained about 4 percent in 2023 — underperforming the stock market by a wide margin. That made 2024’s outsized gain even more significant. Last year’s returns are also higher than Third Point’s 23.9 percent gain in the bull market of 2021.
Loeb is known for his savvy at reading markets, so it’s no surprise that Third Point’s gains were driven, in large part, by two of the “Magnificent Seven” stocks that have dominated the markets during the past two years: Meta Platforms and Amazon. Those seven stocks, gaining an average of 63 percent in 2024, accounted for more than half of the gains of the S&P 500 and make up a third of the index. The S&P500 had a total return of 25 percent in 2024.
Third Point’s other top winners were Vistra and semiconductor manufacturing company TSMC, along with an unnamed private position.
While Loeb is most well known as one of the most successful activist investors, he doesn’t have any activist, post activist or what he calls “constructivist” positions at the moment, according to a report to investors in the fund. Loeb defines constructivism as “communications with an issuer regarding Third Point ideas to increase shareholder value that conclude without activism” whereas he defines “as an active campaign currently ongoing.”
But that may change as Loeb has positioned Third Point to benefit from expected policies from the incoming Trump administration that would augur well for more mergers and other activist plays.
Even before the presidential election, Loeb said in his third quarter letter, Third Point had positioned itself to benefit from Trump policies, including tariffs that would “increase domestic manufacturing, infrastructure spending, and prices of certain materials and commodities” as well as a loosening of regulations, especially the “activist antitrust stance” of the Biden administration.
Loeb said in the letter that he was getting prepared for more event-driven investing “particularly since most of our competitors in this area have retired or moved on.” He argued that “The potential for risk arbitrage transactions and corporate activity could usher in a golden age for the strategy. At this point, our gross exposures are low, we have modest nets, are well positioned in our current portfolio, and can deploy fresh capital as opportunities arise.”
Third Point ended the year with a net equity exposure of 76.5 percent, all in names with fundamental and event-driven catalysts, 37.9 percent in credit, and 5.3 percent in privates.
The fund’s biggest sector exposure was in industrials and materials, followed by financials. At year-end the fund had 115 equity positions and was short 65 of them.
Last year Third Point’s biggest losers in the book were Bath & Body Works, Glencore, Advance Auto Parts, DuPont, and an unnamed short position.