Dan Loeb’s Third Point capped a strong second quarter with another gain in June.
The firm’s Third Point Offshore fund rose 3.8 percent in June. As a result, the multistrategy fund — which prefers calling itself an opportunistic value fund — is up 13.1 percent for the year, according to the firm’s June monthly client letter.
This is shy of the 18.5 percent gain for the Standard & Poor’s 500 stock index, including dividends reinvested.
According to Third Point, the fund posted gains in June across the capital structure. Within equities, the long book returned 7 percent, in line with the S&P 500. This was offset by a 3.7 percent loss in the short book. Healthcare and consumer bets were the best performing equity sectors in June, according to the report.
The long credit book rose 0.50 percent while the short book was flat.
“Within credit, strength in both corporate credit and ABS (asset-backed securities) contributed to positive returns,” Third Point told clients in the letter.
Drilling down the portfolio, in June, Sony replaced PG&E among Third Point’s five-largest disclosed single issues. The other four are Baxter International, Nestle, United Technologies, and Campbell Soup.
Sony, now Third Point’s second-largest position, has been an on-and-off activist target for the hedge fund firm since 2013.
In a June 13, 2019 letter to investors, Third Point asserted that the entertainment and technology giant is just as undervalued as it was six years ago, calling it “one of the most undervalued large cap businesses in the world today.”
Third Point stressed that 75 percent of Sony’s profits come from four “crown jewel” businesses: gaming, music, pictures, and semiconductors. The hedge fund called on Sony to consider a spin-off of its semiconductors division, calling it “Sony Technologies,” and list the company in Japan; divest its public equity stakes in Sony Financial, M3, Olympus, and Spotify; and “optimize its capital structure,” which would entail boosting leverage and increasing stock buybacks.
“New Sony” would include the company’s gaming, music, and pictures segments and would become the company’s core, Third Point added.
Meanwhile, Third Point also recently sent a letter to United Technologies Corporation’s board opposing the conglomerate’s planned merger with Raytheon Company.
“Third Point believes there is no compelling strategic or financial rationale for this merger, and believes it is unlikely to create sufficient value for shareholders,” it stated.
In late May, the Wall Street Journal reported that Third Point established a position in health insurer Centene, which is in the process of acquiring WellCare Health Plans. According to the report, the hedge fund wants Centene to sell itself rather than complete the $15.3 billion deal.
The size of the hedge fund’s Centene stake is not publicly known. The Journal said Third Point owns at least $300 million of Centene’s shares, and this stake could be larger with derivatives.
