Daniel Loeb Doubles Down on Activism

Hedge fund provocateur to devote even more resources to shaking up companies.

Activist investor Daniel Loeb is upping the ante on investor activism. He is going to devote even more of his firm’s resources to activism, which involves buying a stock position in a company and pushing it to boost returns via strategic changes.

Third Point, which manages about $15 billion, currently has 40% of its assets devoted to activism. Increasing that level will allow it to enhance its returns, Loeb said in a letter to investors, which industry newsletter Hedge Fund Alert reported.

Beating the market (a.k.a. alpha) is getting harder using quantitative analysis or fundamental research, Loeb wrote. “Today, we are dedicating more time and capital to activism,” he announced, “which has become an even more valuable strategy in markets increasingly dominated by passive and quantitative players.”

Loeb’s firm has had a pretty good record—returning 15.7% yearly over two decades, ending in 2016—although not without bumps. Third Point lost about 11% in 2018, its worst performance since 2008. Last year, in fairness, many prominent hedge funds struggled. Steve Cohen’s Point 72 Management dropped about 5% and David Einhorn’s Greenlight Capital was down 34%.  

As of September 30, billionaire Loeb’s vehicle was up 12.7% for 2019, according to newsletter Dealbreaker, an advance that was trimmed by a bad call in South America. In August, Third Point took a pounding when the Argentine peso plummeted following the decisive loss of its president in a reelection contest.

One of his latest crusades is against Nestlé, pushing the company to pump up its financial returns by, among other things, divesting its stake in cosmetics company L’Oreal. The hedge fund, which owns about 1.25% of Nestlé’s shares, isn’t satisfied with the Swiss food giant’s moves to overhaul strategy. A major stock buyback, an alliance with coffee chain Starbucks, and investments of fast-growing outfits like Blue Bottle Coffee weren’t enough from Nestlé. 

Another Third Point campaign centers on Japan’s Sony, the entertainment and electronics giant, which Loeb considers to be too complex. He calls on it to spin off its semiconductor business, as well as to shed its holdings in streaming music provider Spotify, camera maker Olympus, and healthcare services company M3.  

The Loeb firm managed about $18 billion as of last year. After a career as a distressed debt and high-yield bond investor, Loeb founded Third Point in 1995 with $3 million. A lifelong surfer, he named it after a surf locale in his native California.

Third Point didn’t return a request for comment.

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