The Morning Brief: Loeb’s Third Point Re Notches February Gain

The investment accounts of Third Point Re, managed by Daniel Loeb’s New York-based hedge fund firm Third Point, rose 4.4 percent in February. As a result, they are back in positive territory for the year, up 2 percent. The investment accounts generally track the performance of the underlying hedge funds managed by Third Point.

In addition, the reinsurance company provided a little insight into the investment accounts’ 5.1 percent gain last year. Most of the profits were driven by equity and structured credit strategies. “Within equities, healthcare and industrials and commodities were the strongest performing sectors, accounting for nearly half of total returns,” Third Point Re notes in its fourth-quarter report. On the other hand, it lost some money from performing credit and macro strategies.

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Shares of Lumber liquidators plunged 25 percent or so, to $38.83, after the news program 60 Minutes alleged that the retailer of hard-wood flooring sold laminate flooring produced in China that contained levels of formaldehyde that far exceeded the health standards in California. One of the biggest beneficiaries: Whitney Tilson of Kase Capital. The fund manager, who started shorting the stock more than a year ago, when it traded at over $100, told CNBC on Monday that he tried to short more of Lumber Liquidators’ stock but he was unable to borrow anymore shares.
After the 60 Minutes report, in which Tilson appeared, he reportedly sent out an e-mail laying out four reasons he thinks the stock will now go to zero. For one thing, he doubts anyone will buy the product, and those who already have it will demand that the company have it tested. Tilson initially presented his short case for Lumber Liquidators at the Robin Hood Investors Conference in November 2013. He then asserted in an October 21, 2014 report that he had boosted his short position in Lumber Liquidators even though the stock had halved since his earlier presentation.
“I now believe that my investment thesis a year ago — that Lumber Liquidators almost certainly was (any may still be) sourcing illegally harvested Siberian hardwoods from Chinese mills — is only the tip of the iceberg,” he stated in the 40-page slide summary, adding that it was his biggest short position.
One of the biggest potential losers is Steve Cohen’s Point72 Asset Management — formerly known as hedge fund firm SAC Capital Management — which owned 4.85 percent of the shares at the end of December. We don’t know whether he dumped the stock ahead of the 60 Minutes report.
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New York-based Tiger Global Management boosted its stake in Zillow by about 650,000 shares, to 3.6 million shares, or 8 percent of the online realtor’s total shares.

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Ricky Sandler’s New York-based Eminence Capital sold 1.2 million shares of Men’s Wearhouse on February 25 for $49.80 per share. Even after the sale, the hedge fund firm still owns more than 4.5 million shares of the retail clothing chain, or 9.4 percent of the total outstanding.

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