Third Point Investors Ltd - Third Point Releases Q2 2024 Investor Letter
August 23 2024 - 8:35AM
UK Regulatory
Third Point Investors Ltd - Third Point
Releases Q2 2024 Investor Letter
PR Newswire
LONDON, United Kingdom, August 23
23 August 2024
Third
Point Publishes Q2 2024 Investor Letter
Third
Point LLC, the Investment Manager of Third Point Investors Limited
(“TPIL”
or the “Company”)
announces that it has published its quarterly investor letter for
Q2 2024. The full letter can be accessed at the Company’s
website:
https://www.thirdpointlimited.com/resources/portfolio-updates
Highlights:
-
Third
Point’s flagship Offshore Fund (the “Master
Fund”)
generated a 1.8% gain in the Second Quarter, with strong
performance from positions connected to the AI thematic tempered by
consumer-oriented event-driven names.
-
During the
first half of 2024, the Master Fund generated profits across all
strategies, posting a 9.8% net return for the year-to-date.
-
Third
Point LLC (“Third
Point” or the
“Investment
Manager”)
provided updates on several positions, including Apple Inc., Corpay
Inc. and Intercontinental Exchange Inc., as well as updates on the
corporate credit and structured credit portfolios.
Performance
Key Points:
-
Third
Point returned
1.8% in the Master Fund during the second quarter of 2024, bringing
the year-to-date return to 9.8%.
-
The top
five positive contributors for the quarter were TSMC, Alphabet
Inc., Amazon.com Inc., Vistra Corp., and Apple Inc.
-
The top
five negative contributors for the quarter were Bath & Body
Works Inc., Advance Auto Parts Inc., Ferguson PLC, Airbus SE and
Corpay Inc.
Outlook
and Market Commentary:
-
While
indices have largely bounced back after the volatility experienced
in August, Third Point expects that volatility will persist for the
rest of the year with macroeconomic and geopolitical events
contributing to a choppy environment. However, the economic
backdrop looks relatively constructive, with decreasing inflation,
declining interest rates competing with a gradually slowing
economy.
-
Companies
continue to invest in AI infrastructure and look for applications
to their businesses, so the Investment Manager continues to hold
investments in cloud infrastructure providers, consumer AI
distribution platforms and semiconductors.
-
However,
Third Point is also finding many investments in the “physical
world” to be equally attractive, including those that are difficult
to disrupt due to competitive moats, consolidated industry
structures, unique products, or capital intensity that deter
competitive investment. Examples of these include aggregates,
nuclear power, life science tools, specialty alloy manufacturers,
and commercial aerospace.
-
The
Investment Manager also believes that the lower rate environment
should produce a wave of activity in credit transactions – both
public and private – as well as a burst of M&A transactions.
Such a period would be welcome for Third Point’s event-driven and
credit strategies.
Position
Updates
-
Apple
- In April,
the Investment Manager took a position in Apple, the world’s
leading consumer technology franchise.
- Despite
its dominance as a business, the stock had become increasingly
under-owned by institutional investors and its relative multiple
had compressed toward a multi-year low due to several years of
stagnant earnings growth, exacerbated by more recent fears that
Apple may turn out to be an AI loser.
- Third
Point’s research led it to a belief that AI-related demand could
drive a step change improvement in Apple’s revenue and earnings
over the next few years.
-
Corpay
- Third
Point added to its position in Corpay during the quarter after
having established a position in Q4 2023.
- Corpay is
a collection of network assets in the payments space, most notably
a fuel card business, where the company processes fuel purchases by
commercial vehicle operators, and a B2B payments business where
Corpay facilitates vendor payments for midmarket
clients.
- Over the
last five years, Corpay has seen its P/E multiple significantly
de-rate from the mid-20s to ~13x as market sentiment toward the
company's core fuel card business soured. Firstly, growth in the
segment has slowed as the market has matured. Secondly, the rise in
popularity of electric vehicles (EVs) as a theme has made investors
question the terminal value of a business whose main function is to
process gasoline and diesel payments.
- Third
Point believes Corpay has adequately planned for an EV transition,
which is also likely to take longer than expected. The Investment
Manager also sees rapid growth for the company’s payment business,
which should eventually overtake the fuel card
business.
-
Intercontinental
Exchange (ICE)
- Third
Point also added to its position in Intercontinental Exchange after
having established a position in April
2023, when the company’s proposed acquisition of Black
Knight impacted the share price.
- While the
deal overhang has lifted, the Investment Manager believes there is
a re-rating opportunity stemming from a structural and cyclical
acceleration of growth.
- The main
areas of opportunity, in Third Point’s view, are in ICE’s energy
and mortgage divisions. Energy is expected to continue its fast
growth by virtue of the increased demand for natural gas and the
globalization of the natural gas market. The mortgage business,
Third Point believes, now has the building blocks to automate the
highly analogue and parochial mortgage origination and servicing
ecosystem in the United
States.
-
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.
Credit
Updates
-
Corporate
Credit
- Corporate
Credit experienced relatively muted performance in the first half
of 2024, due to a slower-than-anticipated realization of the deal
events that Third Point expects to drive its positions
higher.
- Looking
ahead, Third Point believes the table is set for increasing
volatility and a broader opportunity set is already emerging.
Overall credit spreads are tight, however this belies the
underlying dispersion in the market. BB spreads are near their
tightest levels ever in comparison to BBBs, while the ratio of CCC
to B spreads is at its highest in history. Third Point believes
that this dispersion partly reflects a recognition that the long
and variable lags associated with changes in monetary policy are
beginning to manifest.
- The
Investment Manager believes that public credits will face
increasing stress as the impact of higher rates hits fixed rate
issuers that have to refinance at higher rates. Third Point expects
these pressures to provide a wealth of opportunity in secondary
markets for public credit.
-
Structured
Credit
- Third
Point anticipates increased opportunities in the corporate and real
estate structured finance markets as credit deteriorates. In the
firm’s US residential housing exposure, Third Point remains excited
about the current return profile and capital appreciation potential
as rates trend lower. The structured credit portfolio is long
duration in its mortgage exposure, and the rate rally provides a
promising tailwind to the projected return profile.
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 $500 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 44-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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