Dan Loeb Stock Portfolio: 10 Top Stock Picks
In this article, we discuss Dan Loeb and his top 10 stock picks. If you want to read about some more stocks in the Loeb portfolio, go directly to Dan Loeb Stock Portfolio: 5 Top Stock Picks.
Wall Street is full of billionaire investors who have profited from the incredible riches offered by the United States stock market for the past few decades. One of these is Dan Loeb, the chief of New York-based Third Point, a hedge fund he founded in 1995 with just $3.3 million in capital. In the years since, his fund has become one of the most successful in the finance world with an equity portfolio worth over $6.5 billion at the end of the second quarter of 2023. Loeb is an activist investor who buys troubled companies and sets them on the path to profitability.
Loeb showed his business acumen from an early age, starting his own skateboard company while he was still in high school and earning a nickname from teachers that reflected his interest in the US stock market. His father was a lawyer, and his aunt was one of the founders of the famous Barbie doll, developed by toy firm Mattel. Loeb has admitted these influences helped shape his investing ideology. Loeb earned an undergraduate degree in economics from Columbia University. At Columbia, Loeb was classmates with Barack Obama, who would later go on to become the 44th President of the United States.
In 1980s and 1990s, Loeb honed his investment skills, working in various positions that gave him exposure to equity trading, corporate development, risk analysis, distressed debt, bankruptcy analysis, and high-yield bond sales. This diverse background served as a bedrock for the founding of his hedge fund in the mid-nineties. Since then, he has beaten the returns of the S&P 500 hundred several times, even returning more than 20% to investors in 2012. Loeb is famous for taking on boards and CEOs of companies in trouble, so much so that some firms turn to his hedge fund before releasing their earnings to pre-empt investor concerns.
The shorting prowess of Loeb has been threatened in recent years as retail investors initiate short squeezes to undermine hedge fund managers. In 2021, retail investors initiated short squeezes on stocks like GameStop Corp. (NYSE:GME) and AMC Entertainment Holdings, Inc. (NYSE:AMC), resulting in losses worth billions to prominent hedge funds. Earlier this year, Loeb, in a letter to investors, outlined that his fund would be reducing exposure to single-named firms to counteract short squeeze attempts.
“The short-selling environment is much more challenging than it has been historically. Fundamental analysis is increasingly taking a back seat to monitoring daily option expiries and Reddit message boards, as evidenced by the numerous short squeezes and manipulations of heavily shorted stocks such as AMC and GameStop in 2021 and others this year.”
Even as Loeb limits his shorting activity, he has doubled down on bets in the artificial intelligence space, increasing stakes in big tech firms like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN). Latest filings reveal that between June and September this year, the value of the equity portfolio of his fund decreased by about $200 million. During this period, Loeb made new purchases in 10 stocks, additional purchases in 10, sold out of 13, and reduced holdings in 6 stocks.
Our Methodology
These were picked from the investment portfolio of Third Point at the end of the third quarter of 2023. In order to provide readers with a more comprehensive overview of the companies, the analyst ratings for each firm are mentioned alongside other details. A database of around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2023 was used to quantify the popularity of each stock in the hedge fund universe.
Dan Loeb Stock Portfolio: Top Stock Picks
10. Ferguson plc (NYSE:FERG)
Number of Hedge Fund Holders: 51
Ferguson plc (NYSE:FERG) distributes plumbing and heating products in the United States and Canada. Latest data shows that Third Point owned 1.2 million shares in Ferguson plc (NYSE:FERG) at the end of the third quarter of 2023 worth $208 million, representing 3.16% of the portfolio.
On October 17, Truist analyst Keith Hughes maintained a Buy rating on Ferguson plc (NYSE:FERG) stock and raised the price target to $190 from $180, noting the firm provided exposure to less cyclical products and the non-essential business was very diverse.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Polar Capital is a leading shareholder in Ferguson plc (NYSE:FERG) with 10 million shares worth more than $1.9 billion.
Just like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), Ferguson plc (NYSE:FERG) is one of the top stock picks of renowned investor Dan Loeb.
In its Q3 2023 investor letter, Giverny Capital Asset Management, an asset management firm, highlighted a few stocks and Ferguson plc (NYSE:FERG) was one of them. Here is what the fund said:
“Ferguson plc (NYSE:FERG) is the nation’s leading distributor of plumbing supplies and is growing in the related field of HVAC (heating, ventilation and air conditioning). It’s a good business: pipes, valves, boilers, water pumps and the like are mostly unbranded products. There are a lot of manufacturers with limited pricing power. On the other side, plumbing and HVAC contractors are mostly small businesses without a lot of negotiating clout. The distributor sits in the middle with more buying power than the manufacturers and more pricing power than the plumber. It’s a competitive industry, not a monopoly, but Ferguson is #1 in most of its categories. With its size, it offers good service and a deep inventory position to contractors.
Earnings have compounded steadily over time, but likely will be flat in the coming year, partly because residential home construction is off. We bought the stock for about 15 times 2024 earnings and feel like that’s a good value given Ferguson’s financial strength and long-term outlook.”
9. Jacobs Solutions Inc. (NYSE:J)
Number of Hedge Fund Holders: 46
Jacobs Solutions Inc. (NYSE:J) provides consulting, technical, scientific, and project delivery services. Latest filings reveal that Third Point owned 1.8 million shares in Jacobs Solutions Inc. (NYSE:J) at the end of the third quarter of 2023 worth $245 million, representing 3.72% of the portfolio.
On October 24, Stifel analyst Bert Subin maintained a Buy rating on Jacobs Solutions Inc. (NYSE:J) stock and raised the price target to $150 from $149, noting that infrastructure spending was keeping up with expectations.
At the end of the second quarter of 2023, 46 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in Jacobs Solutions Inc. (NYSE:J), compared to 40 in the previous quarter worth $964 million.
In its Q3 2023 investor letter, Madison Investments, an asset management firm, highlighted a few stocks and Jacobs Solutions Inc. (NYSE:J) was one of them. Here is what the fund said:
“Jacobs Solutions Inc. (NYSE:J), a professional services firm, is benefitting from increased spending on large infrastructure, water, and energy transition projects. Jacobs Solutions is a professional services firm spanning consulting, engineering, and project delivery for both the public and private sector. We admire the company’s strong position across infrastructure, water, advanced manufacturing, and energy transition – all areas which we believe have a bright future. However, as the shares appreciated, we decided to sell to fund more attractive opportunities.”
8. Intercontinental Exchange, Inc. (NYSE:ICE)
Number of Hedge Fund Holders: 62
Intercontinental Exchange, Inc. (NYSE:ICE) operates regulated exchanges and is based in Georgia. 13F filings show that Third Point owned 2.3 million shares in Intercontinental Exchange, Inc. (NYSE:ICE) at the end of the third quarter of 2023 worth $262 million, representing 3.98% of the portfolio.
On October 11, investment advisory Barclays maintained an Equal Weight rating on Intercontinental Exchange, Inc. (NYSE:ICE) stock and lowered the price target to $120 from $122, citing intra-quarter metrics as one of the reasons behind the price target update.
At the end of the second quarter of 2023, 62 hedge funds in the database of Insider Monkey held stakes worth $3 billion in Intercontinental Exchange, Inc. (NYSE:ICE), compared to 61 in the previous quarter worth $2.5 billion.
In its Q1 2023 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Intercontinental Exchange, Inc. (NYSE:ICE) was one of them. Here is what the fund said:
“Intercontinental Exchange was founded in the year 2000 after Western Power Group executive Jeff Sprecher bought Continental Power Exchange from MidAmerican Energy for $1. Sprecher made the acquisition because he recognized that the deregulation of the electric power industry in the United States had opened a market for surplus energy to be traded between power plants. Using eBay as a model, Sprecher aimed to develop a transparent marketplace for over-the-counter energy trading. Acquisitions of International Petroleum Exchange, New York Board of Trade, Creditex, Climate Exchange, NYSE Euronext, Interactive Data Corporation, and Ellie Mae followed, with the commonalities of successful acquisition consisting of small companies early in their growth trajectory that could be scaled on ICE’s platform, and large mature companies where ICE’s technological and operating expertise could reinvigorate and scale their growth trajectory.
Today, Intercontinental Exchange is a transactional marketplace and subscription database business with global scale. Entrenched network effects in a wide range of asset class marketplaces provide a platform from which ICE usesits technology and operating expertise to layer on growth opportunities. After applying digital technology to increase the efficiency of marketplaces, ICE rolls out new innovations on top of its scalable infrastructure. Core competencies in collecting and cleansing unstructured data to build databases enforce ICE’s ability to capture the data exhaust from its marketplaces to provide recurring subscription-based revenue streams.“Additionally, we initiated a position in Intercontinental Exchange, Inc. (NYSE:ICE) (U.S.) during the quarter. Intercontinental Exchange is one of the largest and most successful financial exchange operators. The company was created through a series of shrewd acquisitions under founder and CEO Jeff Sprecher. We believe Sprecher is an excellent CEO with a history of astute capital allocation and an ability to adapt to opportunities and competitive threats. Today, Intercontinental Exchange competes in three primary segments: exchanges, fixed income/data services and mortgage technology. We believe each of these businesses exhibits attractive economic characteristics and will grow earnings faster than GDP over time. Investors today are concerned about Intercontinental Exchange’s mortgage segment as rising interest rates have depressed origination volumes. We agree that this segment will be pressured in the near term. However, only 7% of trailing 12-month revenues are sensitive to mortgage volumes, and we believe they will eventually revert to historical norms. Today, however, Intercontinental Exchange sells for what we believe is an underserved discount to its exchange peers and private market valuations.”
7. DuPont de Nemours Inc (NYSE:DD)
Number of Hedge Fund Holders: 39
DuPont de Nemours Inc (NYSE:DD) provides tech-based materials and solutions. Securities filings show that Third Point owned 4.1 million shares in DuPont de Nemours Inc (NYSE:DD) at the end of the third quarter of 2023 worth $309 million, representing 4.69% of the portfolio.
On November 2, RBC Capital analyst Arun Viswanathan maintained an Outperform rating on DuPont de Nemours Inc (NYSE:DD) stock and lowered the price target to $85 from $90, backing the firm for continued margin expansion in the coming months.
At the end of the second quarter of 2023, 39 hedge funds in the database of Insider Monkey held stakes worth $895 million in DuPont de Nemours Inc (NYSE:DD), compared to 52 in the previous quarter worth $1.2 billion.
6. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 225
Meta Platforms, Inc. (NASDAQ:META) is a tech firm that owns and runs social media platforms. Regulatory filings show that Third Point owned 1.1 million shares in Meta Platforms, Inc. (NASDAQ:META) at the end of the third quarter of 2023 worth $330 million, representing 5% of the portfolio.
On November 1, Loop Capital analyst Rob Sanderson maintained a Buy rating on Meta Platforms, Inc. (NASDAQ:META) stock with a price target of $375.
At the end of the second quarter of 2023, 225 hedge funds in the database of Insider Monkey held stakes worth $30 billion in Meta Platforms, Inc. (NASDAQ:META), compared to 220 in the preceding quarter worth $25 billion.
In addition to Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META) is one of the top stock picks of renowned investor Dan Loeb.
In its Q3 2023 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and Meta Platforms, Inc. (NASDAQ:META) was one of them. Here is what the fund said:
“As for other quarterly contributors, Alphabet, Inc., (GOOG) and Meta Platforms, Inc. (NASDAQ:META) added to their exceptional year-to-date returns. Meta Platforms and Alphabet were the true year-to-date standouts. After steep declines in 2022, both stocks rebounded sharply due to a combination of solid fundamentals, disciplined operational execution, and improved sentiment. Despite outsized gains and attention, we think both Alphabet and Meta remain undervalued.”
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Disclosure. None. Dan Loeb Stock Portfolio: 10 Top Stock Picks is originally published on Insider Monkey.
