Today I received Dan Loeb's Third Point Fourth Quarter 2012 Investor Letter. As usual its a fantastic read (embedded below). As has been reported in recent weeks, Third Point made an absolute killing getting long Greek sovreign debt. Assets under management now top an impressive $10B.
A favorite quote from the letter: "We dug deep beyond the frightening headlines and conducted in-depth research on the state of political and economic affairs globally, helping us develop a variant view and giving us confidence to deploy capital. Our ability to generate returns was boosted by a breakdown in correlations, and this shift provided the key for us to deliver alpha across asset classes, sectors and geographies."
Loeb goes on to discuss their position in Herbalife and lays out a very compelling case for a long position in the stock. His take-away: "Applying a modest 10-12x earnings multiple suggests Herbalife’s shares are worth $55-$68, offering 40-70% upside from here and making the company a compelling long investment for Third Point. Given that the Company has historically traded more in the 12-14x range (and traded at 16-20x earnings through much of 2011 and early 2012), the opportunity for the Company to tell its side of the story tomorrow at its Analyst Day in New York, and the significant short interest, we believe shares could even trade well above our current price target."
Loeb also discloses positions in Morgan Stanley and Tesoro Corporation. You can read the long arguments in the letter below. Enjoy!
thirdpoint.4q12investorletter.010913
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