Hedge fund titan Dan Loeb in his own words
It's been a tough year for Third Point and Dan Loeb. The hedge fund has $17 billion under management but is up just 0.6% this year compared to the S&P 500 through September 30. Wit its failed activism in Campbell Soup and the recent market selloff, it's same to say the situation has deteriorated since.
Loeb's latest letter is up in Third Point's website, you can view it here.
On the latest slump, Loeb believes it was caused by rising Treasury yields which climbed to 3.2% from 2.8% in August.
He writes:
"Rates were driven higher by Fed Chair Powell's commentary that spooked the market into quickly projecting the worst‐case scenario, i.e. that a tightening overshoot would drive an otherwise buoyant economy into recession. These fears manifested themselves initially in the de‐levering of growth stocks, causing volatility to rise and the market to breach levels to the downside, driving systematic and quantitative strategies to accelerate selling in a window of time where corporates were not participating in buyback programs due to the blackout period. At the same time, a string of weak earnings pre‐announcements made investors question what had been a firewall for the S&P until that point....It always seems like the perfect storm in hindsight. Weakening earnings plus trade war escalation plus a potentially overzealous Fed was a toxic combination, particularly for cyclicals."
Overall, he sees the trend in US growth slowing with the balance of global growth tilted depending on whether Chinese stimulus succeeds. Loeb sees no signs of a recession and says it's important to stay balanced and not get overly negative.
However he has shifted to a more defensive position.
"We have delevered our portfolio, reduced our tech exposure meaningfully, and grown our short book. We expect to be net sellers over the next few months if markets rally," Loeb writes.
