Investing

3 Stocks Make Up 30% of Daniel Loeb's $8.7 Billion Portfolio

Courtesy of Third Point

Daniel Loeb is the quintessential activist investor. His Third Point Capital hedge fund is known for launching activist campaigns against companies and their boards to shake them out of their lethargy.

He also seeks to unlock shareholder value through special situation investing, seeking out companies early in their growth cycle to take a board seat on, as well as through mergers and acquisitions, restructurings, or other catalysts that can produce superior returns.

Third Point was founded in 1995 with $3 million and today has $8.7 billion in assets under management (AUM). His portfolio is fairly diverse, with over 40 different holdings, but Loeb owns positions in three companies that account for 30% of the total.

Although Loeb is well-known for publicly clashing with corporate management, publishing scathing shareholder letters calling out their failings, not every investment is an attempt to change a company’s direction. In fact, with his three biggest holdings, he has been a long-term shareholder, sometimes for decades.

Key Points About This Article:

  • Daniel Loeb made his mark in investing circles by becoming one of the most prominent activist investors, willing to publicly take corporate management to task.
  • Although he often looks to change a company’s direction, that’s not always the case and the three companies below show ones he is willing to take large stakes in to go along for the ride.
  • If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Amazon (AMZN)

Amazon
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Amazon sign on fulfillment center building

E-commerce giant Amazon (NASDAQ:AMZN) is the largest holding in Loeb’s Third Point portfolio. He owns 5.1 million shares worth $986 million for more than 11% of the portfolio’s holdings.

While Loeb has owned Amazon stock for years, he really began acquiring its stock last year, buying 1 million shares. His average buy-in price is just under $127 per share, indicating he has a 47% gain on his position. It’s clear that Loeb has confidence in Amazon’s long-term growth prospects. The stock is up 28% over the past 12 months.

Wall Street is looking for Amazon to grow earnings 30% annually for the next five years. Most of that growth will continue to come from Amazon Web Services, the cloud computing business. Revenue jumped 19% year-over-year to a record $26.3 billion as Amazon added more artificial capabilities to its services. Companies are flocking to its cloud offerings, allowing AWS to gain market share. It now leads with a 32% share of the cloud sector.

PG&E (PCG)

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PG&E headquarters

California electric utility PG&E (NYSE:PCG) is perhaps Loeb’s longest held position, having first established a stake in 2002. Over the next 15 years, Third Point saw the value of its stake rise nearly fivefold compared to the S&P 500 almost tripling in value. Yet a series of devastating wildfires caused by California’s faulty forest management policies and PG&E’s lack of infrastructure maintenance resulted in vast property destruction and fatalities.

The mounting legal liabilities led PG&E to declare bankruptcy in 2019. It emerged from Chapter 11 a year later, a much leaner, less indebted company. Loeb bought PG&E bonds when they fell to distressed levels that were subsequently converted into equity. Today he owns 53.8 million shares of the utility valued at $938 million, good for a 10.8% share of Third Point’s portfolio.

Since PG&E emerged from bankruptcy, its stock has more than doubled in value, again surpassing the benchmark index’s gains. With an average buy price of $9.66 per share. Loeb has a 104% average profit considering PCG shares trade just under $20 a stub.

Microsoft (MSFT)

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Microsoft sign at its Silicon Valley headquarters

The third-largest position in Third Point’s portfolio is Microsoft (NASDAQ:MSFT). Another long-term holding (he began investing in MSFT shares in 2006), Loeb today owns 1.6 million shares valued at $706 million shares. It equates to an 8% stake in the portfolio.

Yet as the tech giant rose as part of the Magnificent Seven to become the most valuable stock on the market (today it sits in second place just behind Apple (NASDAQ:AAPL), Loeb has been taking profits to lock in gains while still maintaining a sizable position. He has sold off some 650,000 shares since the third quarter of 2023. The stock is still up 15% year-to-date despite peeling back 8% from its July all-time high.

Microsoft, of course, is a much different company than it was in 2006. It has become one of the premiere AI stocks and its Azure cloud services platform, although the smallest of the Big Three, has become the fastest-growing. It should be part of what continues driving Microsoft to new highs in the future.

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