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Morning Brief: Third Point Extends Gains in August

All of Third Point’s gains last month were from the long book in its long-short strategy.

  • By Stephen Taub

Dan Loeb’s Third Point extended its gains in August in what is shaping up to be a very strong year for the multi-strategy manager best known for his activism. Third Point Offshore rose 1.3 percent last month and is now up 13.2 percent for the year. The firm says this compares with an 11.9 percent return for the Standard & Poor's 500 index, including dividends reinvested, during the first eight months of 2017.

All of Third Point’s gains last month were from the long book in its long-short strategy. The hedge fund’s equity book entered August with a net exposure of 69.1 percent, trimming its exposure to 65 percent at the start of this month. The firm also pared the net exposure of its credit book to 9.7 percent from 10.3 percent.

In its second-quarter letter dated July 26, Third Point said its exposure to Europe is the highest since 2010. In the second quarter the fund reduced its investments in bank financials and reoriented its macro book from one benefiting from rising inflation to investments in companies that benefit from low inflation. “Looking ahead to the second half of the year, we still believe that central banks will be important drivers of action,” the hedge fund wrote in the letter. “While it might be too early to say that the key central banks have turned hawkish, their tone is changing and they are well past the point where any hiccup in the market will prompt increased accommodation.”

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ValueAct Capital bought about 457,000 shares of Seagate Technology Public Limited Co., boosting its stake to 7.4 percent, according to a regulatory filing. The firm paid roughly $31 a share.

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Bill Ackman’s Pershing Square Capital Management has filed its definitive proxy statement for its fight with Automatic Data Processing. The hedge fund has nominated three individuals, including Ackman, to the payroll processing and consulting firm’s board. “While the company has enjoyed a decades-long, leading market position and produced good historical results, we believe that ADP’s operating efficiency is significantly below that of its competitors and its potential,” Pershing Square said in the proxy statement. “In addition, we believe that ADP has been too slow to adapt to a rapidly evolving and highly competitive marketplace.” The hedge fund said in the document that “ADP can meaningfully improve its operating performance by improving the quality of its software and service offerings, significantly reducing operating costs, and increasing efficiency, which will accelerate growth and significantly improve profit margins.”

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