Third Point Investors Ltd - Third Point Releases Q1 2024 Investor Letter
May 01 2024 - 8:30AM
UK Regulatory
Third Point Investors Ltd - Third Point
Releases Q1 2024 Investor Letter
PR Newswire
LONDON, United Kingdom, May 01
1 May 2024
Third
Point Publishes Q1 2024 Investor Letter
Third
Point LLC, the Investment Manager of Third Point Investors Limited
(“TPIL”
or the “Company”)
announces it has published its quarterly investor letter for Q1
2024. The full letter can be accessed at the Company’s
website:
https://www.thirdpointlimited.com/resources/portfolio-updates
Highlights:
-
The Master
Fund performed well, generating a 7.8% gain in the First Quarter,
driven by the strong performance of large cap tech companies as
well as continued gains from event driven positions including Bath
& Body Works and Vistra.
-
Third
Point continues to be constructive on the current risk-taking
environment, believing that absolute and real interest rates are
near or at the top of their ranges, and with important themes such
as Artificial Intelligence (AI) presenting interesting
opportunities across sectors.
-
The
Investment Manager outlines in detail several positions that are
leveraged to the AI theme, which is a key element in the thesis of
nearly half of the firm’s equity positions currently. It also
provides an update on its activist position in Advance Auto
Parts.
Performance
Key Points:
-
Third
Point LLC (“Third
Point” or the
“Investment
Manager”)
returned 7.8% in the flagship Offshore Fund (the
“Master
Fund”) during
the first quarter of 2024.
-
The top
five positive contributors for the quarter were Meta Platforms
Inc., Vistra Corp., Amazon.com Inc., Bath & Body Works Inc.,
and Microsoft Corp.
-
The top
five negative contributors for the quarter, excluding hedges, were
Pacific Gas & Electric Co., DuPont de Nemours Inc., Humana
Inc., Marvell Technology Inc., and a Short Position.
Outlook
and Market Commentary:
-
Third
Point believes that we are no longer in an inflationary economy
based on an analysis of labour, rents and other key components, and
thus, absolute and real interest rates are at or near the top of
their ranges.
-
The firm
continues to be in the “soft landing” camp, but sees some impending
weakness in labour, which could impact demand in certain sectors.
However, it expects that future action from the U.S. Federal
Reserve will temper the extent of future economic
declines.
-
Third
Point sees that unlike in past periods of technological paradigm
shifts, the new technology of AI favours incumbents which are
deploying their financial and intellectual war chests to win the AI
arms race.
-
This is
most obviously apparent at “legacy” technology leaders such as
Microsoft and Amazon, but can also be seen in a diverse set of
sectors, including energy (Vistra) and market data (London Stock
Exchange Group).
Position
Updates
-
Vistra
Corp.
- Vistra is
one of the largest independent power producers (“IPPs”) and retail
electricity providers in the U.S., which has been valued at a steep
discount to the utility sector and broader market due to
supply/demand imbalances keeping U.S. electricity prices
low.
- The
company, however, has been a smart capital allocator, and in
March 2023 acquired the nuclear
generation assets of Energy Harbor, which served as the catalyst
for Third Point acquiring shares.
- More
recently, nuclear generation assets have come to be appreciated as
a reliable and clean source of power for data centre buildouts as
the AI arms race commences.
- Third
Point believes Vistra is in a good position to capitalize on these
trends, and it expects the discount applied to their assets to
continue to narrow as their business becomes increasingly essential
to serving domestic power demand.
-
London
Stock Exchange Group
- During the
first quarter, Third Point added to its position in LSEG a
mission-critical capital markets data provider that it believes
will be a beneficiary of Generative AI adoption in financial
services.
- LSEG is
now the only scale vendor working with Microsoft to democratise
access to financial data and embed it directly into Office365.
Third Point also expects that LSEG/MSFT will co-develop a powerful
Research Assistant application sitting on top of both LSEG’s and
clients’ data estates that will meaningfully reduce the time and
manpower needed to analyse data.
-
Alphabet
- During the
first quarter, Third Point made a substantial investment in
Alphabet as the market worried about the impact of new AI entrants
on Google Search.
- With
Generative AI poised to take content creation costs to zero, much
like when the internet took distribution costs to zero, there will
be a proliferation of information. Against that backdrop, the
Investment Manager believes that Google Search will be increasingly
important as a source of truth.
- In
addition, Third Point is encouraged by marginal improvements to
control expense growth as well as decisive handling of employee
unrest.
-
TSMC
- During the
first quarter, Third Point added to its investment in TSMC, which
it sees as the “toll road” of the semiconductor industry,
particularly for AI compute.
- Today,
TSMC derives a relatively small percentage of its revenue from AI
processors, largely from Nvidia, but Third Point believes that
percentage will rise quickly as AI compute broadens and as
companies such as Amazon, Microsoft and Meta all increasingly rely
on TSMC to build their own chip designs.
- The main
concern weighing on TSMC shares is Intel’s entry into the
semiconductor foundry market, however, Third Point believes it will
prove difficult for Intel to challenge TSMC’s
dominance.
-
Advance
Auto Parts
- Third
Point established an activist position in Advance Auto Parts in the
fourth quarter of 2023 and subsequently went public with the
position in the first quarter of 2024.
- Advance
operates in the highly attractive auto aftermarket industry, which
has proven resilient in various consumer cycles and is currently
supported by increasing vehicle complexity, a growing and aging
fleet of vehicles on the road, and supply and affordability
challenges.
- While
Advance has significantly underperformed peers over the past
several years, which presented a compelling entry point, Third
Point’s work suggests that many of these shortcomings are not
structural.
- Feedback
has been consistent that a lack of relevant industry experience in
key roles has led to years of inconsistent execution. Third Point
believes that a portion of the performance gap versus peers can be
closed with new leadership and advisors in place.
- Following
engagement with Third Point, the company recently added three new
directors, who each bring unique and highly relevant industry
experience that the previous Board lacked.
- Third
Point believes that even minor operational improvements at the core
will drive considerable upside to shares, and it is confident that
the company now has the right leadership in place to
deliver.
Press
Enquiries
Third
Point
Elissa
Doyle, Chief Communications Officer and Head of ESG
Engagement
edoyle@thirdpoint.com
Tel: +1
212-715-4907
|
Buchanan
Charles
Ryland
charlesr@buchanan.uk.com
Tel: +44
(0)20 7466 5107
Henry
Wilson
henryw@buchanan.uk.com
Tel: +44
(0)20 7466 5111
|
Notes
to Editors
About
Third Point Investors Limited
www.thirdpointlimited.com
Third
Point Investors Limited (LSE: TPOU) was listed on the London Stock
Exchange in 2007 and is a feeder fund that invests in the Third
Point Offshore Fund (the Master Fund), offering investors a unique
opportunity to gain direct exposure to founder Daniel S. Loeb’s
investment strategy. The Master Fund employs an event-driven,
opportunistic strategy to invest globally across the capital
structure and in diversified asset classes to optimize risk-reward
through a market cycle. TPIL’s portfolio is 100% aligned with the
Master Fund, which is Third Point’s largest investment strategy.
TPIL’s assets under management are currently $600 million.
About
Third Point LLC
Third
Point LLC is an institutional investment manager that actively
engages with companies across their lifecycle, using dynamic asset
allocation and an ethos of continuous learning to drive long-term
shareholder return. Led by Daniel S.
Loeb since its inception in 1995, the Firm has a 43-person
investment team, a robust quantitative data and analytics team, and
a deep, tenured business team. Third Point manages approximately
$11.2 billion in assets for sovereign
wealth funds, endowments, foundations, corporate & public
pensions, high-net-worth individuals, and employees.
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