Third Point 2Q 2010 Letter
In the past, we have discussed Dan Loeb's hedge fund: Third Point. I have always enjoyed Loeb's commentary on the market and certain distressed debt positions (a place I know they enjoy to play). Below you will find their most recent letter, and below that some commentary from me. Enjoy!
Hunter Commentary
- Wow. Blames the market pullback on Goldman Sachs (disclosure: I am long the equity - actually bought it the day after the SEC investigation was announced). You know what: I tend to partially agree with this - It definitely left jitters in the market - I get daily runs from BNP with the title "CDS: Where we are since the GS annoyance" (see below). That being said, I do think the market ran way too hard into April and we were do for a pullback, no matter the catalyst.
- Agree with his point about spreading the "punitive" costs across the general population. The card program is just one example - The health care bill is of course the prime example.
- As many money managers have pointed out, its hard to invest when the rules are changing nearly EVERY SINGLE DAY.
- Commentary on corporate boards: Spot on. 8 times out of 10 I am disgusted when I read XYZ company's proxy.
- Third Point was short the for-profit education sector that has gotten annihilated recently.
- Lowest gross and net exposure since March 2009. Looking for ideas with hard catalysts (think emergence from bankruptcy...)
- Put in place some Baupost like 'blow up' hedges
- "...the sidelines is perhaps the most 'crowded trade.'" I have never thought about it like that but he is spot on
- Significant positions in post-reorg equities hurt performance during the quarter - still has "high convictions" in the names
- As he notes beautifully in the letter, post-reorg equities are sometimes referred to as "roach motels" - i.e. easy to get in and impossible to get out.
- Incredible discussion on REMICs and Re-REMICS, a place we are also invested. Something everyone should read. The upside/downside of the Alt A trades have been spectacular.
As always, an incredible read from Dan Loeb.
1 comments:
I looked up 13F of 3rd Point to see which post-reorg equity he was describing in the letter.
The only two I see are Xerium and CIT, none of them fit the price movement mentioned in the letter.
The one that fits the description to the tee is LALLF but it was absent from the 13F. Probably because it trades on the OTC BB and the filing and disclosure requirements are different from listed stocks.
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