Third Point’s January Gain Lags Market

The multistrategy fund’s largest activist positions led the firm’s performance last month.

Daniel Loeb, chief executive officer of Third Daniel Loeb, chief executive officer of Third Point (David Paul Morris/Bloomberg)

Daniel Loeb, chief executive officer of Third Daniel Loeb, chief executive officer of Third Point

(David Paul Morris/Bloomberg)

Dan Loeb’s Third Point started the year on a positive note, posting a respectable gain in January.

Third Point Offshore gained 2.9 percent for the month after losing 11.1 percent last year, according to the hedge fund firm’s January report to clients. While this ordinarily would be considered a strong showing, the multistrategy fund came up far short of the S&P 500, which rose 8 percent in January, including dividends reinvested.

The fund’s 2.9 percent return is not too surprising for a variety of reasons.

For one thing, the long-short equity book’s exposure to the market was less than 41 percent net long at the end of January, down slightly from yearend. Its gross exposure was slightly less than 100 percent. So, it is understandable that it did not perform in line with the overall stock market.

Also, equities are not the fund’s sole strategy. It also has a sizable credit book and pursues other strategies such as currencies, macro, and private investments.

This said, January’s performance was driven by equities, especially its long book, which was up 5.8 percent. Its shorts lost 2.8 percent, according to Third Point’s January report.

The firm, which declined to comment, pointed out in the one-page report that long/short equity gains were mostly driven by healthcare, consumer and industrials stocks.

Its five largest disclosed longs continued to be Baxter International, Nestle, United Technologies Corp., Campbell Soup Co., and DowDuPont.

Shares of Baxter rose 10 percent in January. The health-care giant remains the firm’s largest position even after selling 8 million shares for $68.62 each, according to a regulatory filing in early December. Third Point cited its portfolio concentration level for the sale, saying it is not currently contemplating further sales for at least 90 days. Third Point added in the filing it is “pleased with the performance” of Baxter’s chief executive officer and “confident in his ability to continue to create value for shareholders.”

Munib Islam, a partner and the head of equities research at Third Point, has served as a director of Baxter since September 2015.

As for its investment in Nestle, the company’s over-the-counter shares were up 7.8 percent last month. Loeb has been pushing the Swiss food giant to sell some assets and change the status quo.

Shares of United Technologies Corp., Third Point’s third largest long and another target of its activism, rose almost 11 percent last month. Campbell Soup was up 8.5 percent in January while DowDuPont shares increased less than 1 percent.

In late November, Campbell had agreed to add two new directors to its board in a settlement with Third Point.

Meanwhile, Third Point’s credit strategy was flat in January, with 0.2 percent gains in its long book offsetting a 0.2 percent loss in the short book. The firm’s “other” strategies showed a slight loss for the month due to losses in currencies.

Third Point Offshore United Technologies Corp. Baxter International Swiss Campbell Soup Co.