Morning Brief: Third Point’s Dan Loeb Still Upbeat on Stock Market

January 23, 2018   Stephen Taub

The manager is still bullish for 2018 but is tapering his enthusiasm with caution.

Third Point’s Dan Loeb remains bullish for 2018. In his fourth-quarter letter, obtained by Alpha, the multistrategy manager tells clients he still sees a favorable backdrop for his investment approach, citing several factors, including easy financial conditions, tax cuts and fiscal spending, increased capital expenditures and deregulation.

"Easing financial conditions are a key pillar of growth," stated the report. The hedge fund firm thinks the tax cut and increases in fiscal spending alone could boost GDP growth by 1 percent. Even so, Third Point does issue a caveat to investors, asserting, "While we remain optimistic about the trajectory of the economy and markets, we have weighed our positioning with an acute awareness of the risks. Although we do not fear a recession now, 'event risks’ need to be considered."

For example, the hedge fund firm — whose Third Point Offshore Fund returned 18.1 percent last year — warned that the "unusually favorable combination" of accelerating growth and tepid inflation experienced last year is unlikely to be repeated this year. And while it does not anticipate a recession, Third Point does warn it can arise from unforeseen events. "We believe that our relatively concentrated portfolio of event-driven names is well-positioned," stated Third Point, which also noted it has added resources to its short selling efforts. "While short-selling is always particularly challenging in a bull market, we think that the special situations we have selected in this area will underperform markets and reduce our overall correlation, dampen volatility, and generate alpha."

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Highbridge Capital Management disclosed it owns 1.5 million shares of Nebula Acquisition Corporation, or 5.45 percent of the blank-check company. It was formed by executives at private equity firm True Wind Capital to acquire a technology business.

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Shares of hedge fund favorite Netflix surged more than 8 percent in after-hours trading after the streaming video company reported fourth-quarter results that exceeded expectations. In regular trading on Monday, the stock had already risen more than 3 percent, to $227.58. The stock opened the year around $200 per share.

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Shares of Chipotle Mexican Grill suffered a setback Monday, falling more than 4 percent. However, they are still up 14 percent for the year to date. This is a major activist target of Bill Ackman’s Pershing Square Capital Management.

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Seth Klarman and his wife Beth announced that they have given $5 million to Spelman College, a liberal arts college founded in 1881 for women of African descent. The money will be used to fund scholarships for current and incoming Spelman students.

"We hope our support of scholarships at Spelman will ensure that no young woman will have to leave Spelman prematurely for financial reasons and that scores of others will receive the financial support they need to attend," Klarman states in a press release. The Klarmans previously funded between 2014 and 2017 scholarships for 321 Spelman students across a range of academic disciplines.


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