Dan Loeb’s Third Point said it has cut its
credit exposure by more than two-thirds since the beginning of
2016. "Spreads are near the levels reached in 2007 but interest
rates are 200 basis points lower today, creating little
opportunity for total return," the multistrategy firm writes in
the third-quarter letter to investors in its Third Point
Offshore fund. It points out that in 2016 the firm capitalized
quickly on dislocation in the energy sector.
However, these days it does not see "deep weakness" in any
area or geography. It did say there is stress in the telecom
and retail space but added, "we do not believe the secular
challenges are fully reflected in security prices yet." Third Point also told clients it cannot
forecast the timing of the next credit cycle, adding, "we are
late in this economic cycle, corporate leverage is high, and
interest rates are increasing. Stay tuned."
Elsewhere in the report, Third Point disclosed it owns a
stake in Dover Corporation, an industrial conglomerate the
hedge fund says has a leading share in several highly
consolidated end markets. "Dover shares have materially
underperformed the industrial peer group over the three-year
period preceding our investment," Third Point stated,
indicating this is also its newest activist target. "We have
been engaged in a constructive dialogue with management
regarding several compelling value creation opportunities."
Shares of Dover jumped 6.1 percent, to close at $94.95.
Third Point also continues to hold a position in DowDuPont.
The hedge fund firm initially disclosed a position in Dow
Chemical in its fourth quarter 2013 letter. It added two board
members in 2015 as part of a settlement. Dow and DuPont merged
on September 1. The company said it would split into three
companies, but Third Point and Trian Fund Management have
different suggestions for dividing the chemicals giant into
smaller parts. In its third-quarter letter, Third Point said
the stock trades at just 8.6 times consensus cash flow
estimates for 2019, "a substantial discount to its
sum-of-the-parts" estimate. So, it continues to see
Third Point Offshore gained 3.4 percent in the third quarter
and is now up 14.5 percent for the year.
UBS cut its price target on Chipotle Mexican Grill, from
$380 to $345, and lowered its estimates, citing "still
challenged trends and weak online review data." Last December
the casual dining chain agreed to add four board members as
part of a compromise settlement with Bill Ackman’s
Pershing Square Capital Management. At the
end of the second quarter, Pershing Square was the largest
shareholder, while the stock was the activist’s
third-largest long. Shares of Chipotle slipped slightly, by
0.16 percent, to close at $324.76.
Tiger Cubs Coatue Management and Tiger Global Management
were among a number of investors who participated in the $4 billion Series C
financing for Meituan-Dianping, which calls itself China's
largest service-focused e-commerce platform. The company says
it has more than 280 million annual active buying consumers and
more than five million annual active local merchants across
Shares of Procter & Gamble fell nearly 4 percent, to close at $88.25,
after the consumer products giant reported disappointing
revenues, especially at its Gillette unit. The company claims
to have won its proxy fight last week with Nelson Peltz of
Trian Fund Management.