Third Point got off to a strong start in the second half of the year.
The hedge fund firm headed by Dan Loeb posted a 4.5 percent gain in July compared with just a 2.2 percent return for the S&P 500, including dividends reinvested, according to its July report, made public Tuesday evening. It is now up 6.3 percent for the year, versus 8.6 percent for the benchmark.
Last month, Third Point was led by its equities strategy — primarily the fundamental and event-driven book, which kicked in 3.9 percent of equities’ 4.4 percent contribution.
The biggest contributors for the month were real estate analytics and online marketplace provider CoStarGroup; Nvidia; Amazon; Comfort Systems, which offers mechanical and electrical contracting services; and Talen Energy, an independent power producer and energy infrastructure company.
CoStar and Nvidia are also two of Third Point’s five biggest winners for the year to date.
The largest detractors from July performance were the London Stock Exchange Group, industrials and materials company Carpenter Technology, and an undisclosed private position.
Heading into August, Third Point was roughly 67 percent net long, down from 74 percent the previous month. Its five largest equity long positions were Kenvue (formerly the consumer health care division of Johnson & Johnson), Pacific Gas & Electric, Amazon, CoStar, and Microsoft.
In its second-quarter letter, made public last week, Third Point singled out two stock positions it initiated last quarter. It made a new investment in Rocket Companies based on the company’s “transformative all-stock acquisition of Mr. Cooper [Group].” The hedge fund said Rocket, which it deems “the leading mortgage servicer,” has been a persistent share gainer in the fragmented mortgage origination industry, with a 12 percent market share of refinance originations and a 4 percent share of purchase originations.
“We view the combination of Rocket and Mr. Cooper as a transformative, synergy-rich merger between two technology leaders in the otherwise parochial and cost-inflationary mortgage industry,” Third Point noted in the letter. “Combining the largest refi originator with the largest servicer will, we believe, enable pro forma Rocket to turn ecosystem unit economics on its head.”
Third Point also made a new investment in Informa, calling it the global leader in B2B live events. “We believe Informa has built a strong, underappreciated moat around its core events business benefiting from network effects, scale, and process power since managing events with tens of thousands of attendees is not an easy endeavor,” it explained in the letter. It noted that while some trade associations have reported incurring losses on their annual shows, Informa enjoys 30 percent margins.
