Third Point - Dan Loeb
Upstart is Loeb's largest holding with a 11.38% portfolio weight
Columbia University grad and billionaire investor Daniel S. Loeb manages Third Point, a $14.8 billion hedge fund founded in 1996 with $3.3 million in initial seed money. Third Point returned 11.0% in Q1 of 2021 and is founder-led by Loeb.
Loeb is a self-proclaimed “lifecycle investor,” which means investing in a company in its early stages and supporting the company through IPO and beyond if the company performs well. Loeb explains in the Q1 2021 Investor Letter:
“Unlike a traditional VC firm, we see an IPO as just another stage in the company’s lifecycle and can continue both our board involvement and financial investment in these world-class companies following their public listings.”
Performance & Holdings Value
Third Point has returned 15.1% annually from 1996 to 2021, beating the S&P 500’s annual return of 9.55%.
Since 2015, Third Point has returned a cumulative gain of 127% compared to the S&P 500’s 107%.
Red Line: Third Point Cumulative Return
Blue Line: S&P 500 Cumulative Return
Third Point increased their total holdings value in Q1 by $1.8B, or 14.4%. They have increased their holdings value by 9,948.35% since 2001. Third Point’s holdings value in Q1 is an all-time-high for them.
Current Portfolio
Upstart was Third Point’s #1 winner and also their top portfolio holding in Q1 of 2021, returning a staggering 192.9% in one quarter’s time.
Third Point portfolio contains 124 holdings, although their top 10 holdings account for 46.64% of their portfolio.
Upstart and Third Point - A Brief Timeline
July 2015 - Third Point invests in Upstart before it was publicly traded in a Series C funding round. Valuation at the time is $145 million.
December 2020 - Upstart IPOs at $20/share, offering 12,015,690 shares. Loeb sends in an order to purchase 1.2 million shares, or roughly 10% of all IPO shares. The order is successful. Even before the IPO, Third Point owned ~12.2 million shares, or ~$244 million. Upstart closed at $29.47 on IPO day, ballooning Third Point’s stake to $394.34 million.
June 2021 - Upstart trades at $125, up 500%+ from IPO price, and valued at $9.5 billion. Third Point owns 17.39% of all UPST shares outstanding and their stake was worth $1.72B at the end of Q1. They have not sold a single share thus far and own the most shares among all institutional shareholders of UPST.
Loeb elaborates on his biggest winners in the Q1 2021 Investor Letter:
“Our three top winners in Q1 were born out of our private investing efforts – Upstart, which went public last December; SentinelOne, which is still private but was marked up based on recent secondary transactions and an independent valuation; and SoFi, which agreed to go public via a SPAC transaction in January. These investments were made approximately six years ago, when the companies had relatively new products and scant revenues.”
Third Point decreased holdings in PCG and DIS, their 2nd and 3rd largest positions, respectively.
PCG was only reduced by 2.35%; it was first purchased during Q3 of 2020 at an estimated average price of $9.39. PCG ended Q1 of 2021 at $11.71, a 24.7% increase from Third Point’s initial purchase price in two quarter’s time. However, since Third Point sold so little of their position, it’s likely that they are still bullish on PCG and the energy industry.
Third Point’s DIS stake was cut by 12.5% in Q1. Third Point has been selling their Disney stake since Q3 of 2020 after initially purchasing Disney during Q1 of 2020 at an estimated average price of $107.65. This signifies that Third Point believes their capital can perform better elsewhere, not that they believe Disney will perform poorly. Disney is trading at $173.94 today, giving Third Point a 61.58% gain on their original batch of shares.
Significant Portfolio Changes
Significant buys in Q1 included CSGP, UBER, and EL. Third Point’s new and large positions in CSGP and UBER may signal that they believe a price catalyst will be evident in the short term.
Significant sells in Q1 included BABA, FIS, and ADBE. Third Point has a relatively high turnover rate, holding a top 10 portfolio position for 2.1 quarters on average, and a top 20 portfolio position for 4.45 quarters on average.
SPACs
Interestingly enough, Loeb is a fan of SPACs. He increased his position in several SPACs during Q1, including PSFE, FTCV, AVAN, and KVSC. PSFE is Loeb’s large SPAC holding with a 3.77% portfolio weight. In 2020, Loeb invested more than $550M into SPACs.
Loeb is cautiously bullish on the future economic outlook as evidenced by his increased holdings value. Loeb is quoted below in a Business Insider interview published May 2021.
“Loeb expects the US economy to roar in the coming months. Yet, he warned that future interest-rate hikes, mounting debts, and uneven growth would fuel a buildup of risky debt as federal support fades and the private economy takes over.”
Follow Dan Loeb on Twitter: @DanielSLoeb1
Hedge Vision - Institutional Insights
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Source 1: Third Point Q1 2021 Investor Letter
Source 2: Third Point on Upstart
Lucky man got into SentinelOne before any of us regular folks could...I'm hoping that he's right that the economy will roar soon! I have a lot of money invested lol