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Daniel Loeb's Top 10 Holdings of 4th Quarter

- By Holly LaFon

Daniel Loeb (Trades, Portfolio), founder of Third Point, whose returns have nearly doubled those in the S&P 500 since its 1996 inception, reported on Friday purchasing 13 stocks during the fourth quarter.


The hedge fund heavyweight had 44 stocks to end the quarter, with 23.2% allocated to health care and 21.8% to consumer cyclical stocks - the largest sectors represented. The portfolio's value totaled $13.86 billion.

In a fourth-quarter note to clients, Loeb said he expected the "favorable backdrop for our investment approach will continue due to a variety of factors: easy financial conditions, tax cuts and fiscal spending, increased capex and deregulation."

He also saw four risks that concerned him, despite his optimism about the trajectory of the economy and markets: accelerating growth and tepid inflation, a tightening labor market and wage hike's effect on inflation, peaking earnings growth, unanticipated events triggering a recession.

"We believe that our relatively concentrated portfolio of event-driven names is well-positioned considering the conditions we have described. 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," Loeb wrote.

An activist investor, Loeb has been on the offense at Nestle (NSRGY) since 2017, pushing for changes to increase shareholder value. Specifically, Loeb wanted the company to increase sales and profitability, return cash to shareholders, make more acquisitions and divestitures, and monetize its investment in L'Oreal.

In the fourth quarter, Loeb gave the company high marks for its cooperation. In a client note, he praised CEO Dr. Mark Schneider's goal of growing organic sales growth to mid-single digits, setting a margin target of 17.5-18.5% by 2020, announcing a CHF 20 billion buyback and making portfolio adjustments.

"We continue to support Dr. Schneider and Nestle management and believe that the additional strategic, portfolio, and financial improvements we have outlined, and which we hope are already in process, will drive substantial benefits for all Nestle stakeholders. They will result not only in greater capital appreciation and faster dividend growth for shareholders, but also in more resources for the company to invest in the business and communities in which it operates," Loeb wrote.

New buys

Intercontinental Exchange (ICE)

Loeb purchased 5.5 million shares, representing 2.8% of the portfolio. The stock's fourth-quarter share price averaged $69.

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Intercontinental Exchange Inc. has a market cap of $41.77 billion; its shares were traded around $71.73 with a P/E ratio of 17.00 and P/S ratio of 7.31. The trailing 12-month dividend yield of Intercontinental Exchange Inc. stocks is 1.12%. The forward dividend yield of Intercontinental Exchange Inc. stocks is 1.34%. Intercontinental Exchange Inc. had an annual average earnings growth of 14.80% over the past 10 years. GuruFocus rated Intercontinental Exchange Inc. the business predictability rank of 4.5-star.

Netflix Inc. (NFLX)

Loeb purchased 2 million shares of Netflix Inc., presenting 2.77% of the portfolio. The stock's fourth-quarter share price averaged $193.

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Netflix Inc. has a market cap of $120.86 billion; its shares were traded around $278.52 with a P/E ratio of 222.82 and P/S ratio of 10.64. Netflix Inc. had an annual average earnings growth of 6.10% over the past 10 years.

Lennar Corp. (LEN)

Loeb purchased 5.3 million shares of Lennar Corp., representing 2.4% of the portfolio. The stock's fourth-quarter share price averaged $59.

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Lennar Corp. has a market cap of $19.28 billion; its shares were traded around $60.86 with a P/E ratio of 18.01 and P/S ratio of 1.14. The trailing 12-month dividend yield of Lennar Corp. stocks is 0.26%. The forward dividend yield of Lennar Corp. stocks is 0.26%. Lennar Corp. had an annual average earnings growth of 26.40% over the past five years.

Aetna Inc. (AET)

Loeb purchased 1.85 million shares of Aetna Inc., giving it a 2.41% portfolio weight. The stock's price averaged $172 per share during the quarter.

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Aetna Inc. has a market cap of $58.23 billion; its shares were traded around $178.51 with a P/E ratio of 31.05 and P/S ratio of 0.99. The trailing 12-month dividend yield of Aetna Inc. stocks is 1.12%. The forward dividend yield of Aetna Inc. stocks is 1.12%. Aetna Inc. had an annual average earnings growth of 10.60% over the past 10 years. GuruFocus rated Aetna Inc. the business predictability rank of 4.5-star.

Dentsply Sirona Inc. (XRAY)

Loeb purchased 2 million shares of Dentsply Sirona, giving it a 0.95% portfolio weight. The stock's price averaged $64 per share during the quarter.

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Dentsply Sirona Inc. has a market cap of $13.42 billion; its shares were traded around $58.43 with and P/S ratio of 3.49. The trailing 12-month dividend yield of Dentsply Sirona Inc. stocks is 0.60%. The forward dividend yield of Dentsply Sirona Inc. stocks is 0.60%. Dentsply Sirona Inc. had an annual average earnings growth of 4.0% over the past 10 years. GuruFocus rated Dentsply Sirona Inc. the business predictability rank of 3-star.

General Dynamics Corp. (GD)

Loeb purchased 550,000 shares of General Dynamics Corp., giving it a 0.81% portfolio weight. The stock's price averaged $204 per share during the quarter.

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General Dynamics Corp. has a market cap of $66.57 billion; its shares were traded around $224.19 with a P/E ratio of 23.45 and P/S ratio of 2.20. The trailing 12-month dividend yield of General Dynamics Corp. stocks is 1.50%. The forward dividend yield of General Dynamics Corp. stocks is 1.50%. General Dynamics Corp. had an annual average earnings growth of 4.50% over the past 10 years.

MGM Resorts International (MGM)

Loeb purchased 3 million shares of MGM Resorts International, giving it 0.72% portfolio weight. The stock's price averaged $32 per share during the quarter.

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MGM Resorts International has a market cap of $19.51 billion; its shares were traded around $34.47 with a P/E ratio of 33.79 and P/S ratio of 1.88. The trailing 12-month dividend yield of MGM Resorts International stocks is 1.28%. The forward dividend yield of MGM Resorts International stocks is 1.28%.

Southwestern Energy Co. (SWN)

Loeb purchased 15 million shares of Southwestern Energy, giving it 0.6% portfolio space. The stock's price averaged $6 per share during the quarter.

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Southwestern Energy Co has a market cap of $2.1 billion; its shares were traded around $3.58 with a P/E ratio of 4.42 and P/S ratio of 0.58.

Pinnacle Foods Inc. (PF)

Loeb purchased 1 million shares of Pinnacle Foods Inc., giving it 0.43% portfolio weight. The stock's price averaged $56 for the quarter.

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Pinnacle Foods Inc. has a market cap of $6.96 billion; its shares were traded around $58.48 with a P/E ratio of 39.25 and P/S ratio of 2.24. The trailing 12-month dividend yield of Pinnacle Foods Inc. stocks is 2.09%. The forward dividend yield of Pinnacle Foods Inc. stocks is 2.22%. Pinnacle Foods Inc. had an annual average earnings growth of 12.90% over the past five years.

Nexa Resources SA (NEXA)

Loeb purchased 3 million shares of Nexa Resources, giving it 0.42% portfolio space. The stock's prive averaged $17 during the quarter.

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Nexa Resources Sa has a market cap of $2.65 billion; its shares were traded around $19.90 with a P/E ratio of 32.10 and P/S ratio of 1.28.

See Daniel Loeb (Trades, Portfolio)'s portfolio here.

This article first appeared on GuruFocus.