NEW YORK (Aug 7): Dan Loeb’s Third Point said it took advantage of jitters around China’s relationship with Hong Kong and the US to build out its e-commerce exposure with new positions in Alibaba Group Holding Ltd and JD.com Inc during the second quarter.
Those holdings add to a long position the fund started building in Amazon.com Inc in March.
“Our outlook for Alibaba and the broader Chinese e‐commerce market is bright,” Loeb said in a letter to investors yesterday.
He said he expected both e-commerce companies to continue using their scale to increase revenue through targeted advertisements. He said he was also excited about the potential of some of Alibaba’s other businesses. That includes the planned initial public offering (IPO) of Ant Group, which is 33% owned by Alibaba.
The activist investor also discussed his long position in the Walt Disney Co for the first time since it was disclosed in May. The sell-off of the stock due to concerns around the closure of theme parks and movie theatres provided an attractive entry point at a time when it is accelerating its streaming plan, he said.
“Streaming is Disney’s biggest market opportunity ever,” Loeb said. That market is potentially worth US$500 billion (RM2.1 trillion) over a growing base of 750 million homes with broadband outside of China. Disney’s shares have gained 20% since Third Point disclosed its stake.
Disney’s dominant position in the media landscape sets the company up nicely to to grab a “meaningful chunk” of the streaming market, he said. He also called its plans to release its film Mulan on Disney+ a “defining moment” for the company.
Loeb said he also initiated position in Amazon in March, a stock he said typically traded outside of Third Point’s valuation range. He said it was undervalued due the acceleration of the adoption of e-commerce and cloud computing in the pandemic.
“Even as shopping patterns normalise, we believe that e‐commerce penetration has structurally ratcheted up and that Amazon’s share gains will be sticky.”
Third Point also recently participated in a common equity offering for PG&E Corp, which exited bankruptcy last month. Loeb said the company’s shares trade at a significant discount and that many of the legacy liabilities were addressed in the restructuring.
In May, Loeb returned to his duties as sole chief investment officer after the departure of Munib Islam.
He said he also began to drive his team to make moves that better reflect the current environment. Third Point returned 10.8% on its investments in the second quarter but was still down 7.2% year-to-date.
“These changes to the organisation and our process are having the impact I desired — significantly increasing the volume and quality of actionable ideas and thereby creating a more dynamic and diversified portfolio with improved performance,” he said.