NEW YORK (Reuters) - Bets on U.S. and Japanese stocks helped Daniel Loeb’s hedge fund, Third Point, gain 3.3 percent during the second quarter, even as equity and bond markets suffered rapid sell offs in June, the manager told his investors on Monday.
Loeb, who is one of the $2.25 trillion hedge fund industry’s best known names, said many of his firm’s positions reached their price targets, and that he “began to sell them near their highs in May and early June before the market began to correct sharply.”
A majority of the profits Third Point booked in the second quarter came from event-driven investments in American and Japanese equities, according to the letter.
The firm initiated a large position in Japanese technology company Sony earlier in the year. In the note to investors, Loeb said that, even though Sony has made improvements in some business units, such as the Game and Mobile Products divisions, “drastic - rather than incremental - action is required” in other areas, particularly the Entertainment unit.
“Unlike Electronics, Entertainment remains poorly managed, with a famously bloated corporate structure, generous perk packages, high salaries for underperforming senior executives, and marketing budgets that do not seem to be in line with any sense of return on capital invested,” Loeb said.
The letter, which focused narrowly on bets on Sony, Yahoo Inc YHOO.O and a new position in North American nitrogen fertilizer manufacturer CF Industries Holdings Inc (CF.N), also briefly addressed Third Point’s “early second quarter” exit from a long-held gold position at about $1,450.
Loeb said CF Industries trades at a discount to its peers in the fertilizer and commodity chemical business.
“We believe its structural cash flow generation strength is misunderstood and that management should deliver a much larger dividend to its shareholders,” he added.
Reporting by Katya Wachtel; Editing by Gary Hill and Andre Grenon