Bargain entry point to access activist investor Dan Loeb
A steep 20% discount to net asset value (NAV) at London-listed Third Point Offshore Investors (TPOU) offers an attractive entry point for those keen to access the money-making acumen of Wall Street luminary Dan Loeb, a famous activist investor.
We’ll be upfront and say this investment is not for everyone. Accessing Loeb’s investing skills means paying a premium – ongoing charges are a hefty 2.8%.
Returns can also be lumpy. In good years, Third Point could significantly outperform the market such as in 2013 when it delivered nearly twice the return of the MSCI World benchmark (46.9% versus 25% respectively, according to Morningstar).
In bad years, it could underperform and that’s what you saw in 2018 and 2019. Taking a longer-term view, it has beaten the market with 13.9% annualised returns over the past 10 years versus 12.9% from the MSCI World benchmark.
The investment trust invests directly into Third Point Offshore, the flagship hedge fund of New York-headquartered Third Point, where Loeb serves as chief executive officer.
Loeb is known for sending aggressive letters to companies and proposing big changes, although more recently his investing campaigns have been less contentious, coming with a constructivist bent.
Third Point employs an event-driven, value-oriented investment style, with Loeb seeking to identify situations where a catalyst will unlock value and deliver attractive risk-adjusted returns for his investors. Current positions include electronics group Sony, food group Nestle and medical supply company Baxter.
Loeb believes that stock picking opportunities will be created by greater equity market volatility, increasingly caused by algorithmic and passive trading strategies.
Although Third Point is best known as an activist investor, activism is just a part of this investment firm’s arsenal. Its expertise spans everything from opportunistic credit to short selling to identifying intrinsically mispriced value stocks.
Some of these techniques can be high risk and so investors should only consider buying the shares if they are comfortable with how short-selling works and that they understand betting against companies can cause big losses if Third Point gets it wrong.
Third Point is increasingly focused on generating and implementing more activist and constructivist ideas and beefing up the fund’s exposure to these positions, while also using market sell-offs to snap up stakes in high-quality companies.