REG-Third Point Investors Ltd: Third Point Releases Q1 2024 Investor Letter

Third Point InvestorsAnnouncement

01/05/2024 13:45

1 May 2024

Third Point Publishes Q1 2024 Investor Letter

Third Point LLC, the Investment Manager of Third Point Investors Limited
(“TPIL” or the “Company”) announces it has published its quarterly
investor letter for Q1 2024. The full letter can be accessed at the
Company’s website:
https://www.thirdpointlimited.com/resources/portfolio-updates

 

Highlights:
* The Master Fund performed well, generating a 7.8% gain in the First Quarter,
driven by the strong performance of large cap tech companies as well as
continued gains from event driven positions including Bath & Body Works and
Vistra.  
* Third Point continues to be constructive on the current risk-taking
environment, believing that absolute and real interest rates are near or at
the top of their ranges, and with important themes such as Artificial
Intelligence (AI) presenting interesting opportunities across sectors.
* The Investment Manager outlines in detail several positions that are
leveraged to the AI theme, which is a key element in the thesis of nearly half
of the firm’s equity positions currently. It also provides an update on its
activist position in Advance Auto Parts.
 

Performance Key Points:
* Third Point LLC (“Third Point” or the “Investment Manager”) returned
7.8% in the flagship Offshore Fund (the “Master Fund”) during the first
quarter of 2024.
* The top five positive contributors for the quarter were Meta Platforms Inc.,
Vistra Corp., Amazon.com Inc., Bath & Body Works Inc., and Microsoft Corp. 
* The top five negative contributors for the quarter, excluding hedges, were
Pacific Gas & Electric Co., DuPont de Nemours Inc., Humana Inc., Marvell
Technology Inc., and a Short Position.    
 

Outlook and Market Commentary:
* Third Point believes that we are no longer in an inflationary economy based
on an analysis of labour, rents and other key components, and thus, absolute
and real interest rates are at or near the top of their ranges.
* The firm continues to be in the “soft landing” camp, but sees some
impending weakness in labour, which could impact demand in certain sectors.
However, it expects that future action from the U.S. Federal Reserve will
temper the extent of future economic declines. 
* Third Point sees that unlike in past periods of technological paradigm
shifts, the new technology of AI favours incumbents which are deploying their
financial and intellectual war chests to win the AI arms race. 
* This is most obviously apparent at “legacy” technology leaders such as
Microsoft and Amazon, but can also be seen in a diverse set of sectors,
including energy (Vistra) and market data (London Stock Exchange Group).  
 

Position Updates
* Vistra Corp.	* Vistra is one of the largest independent power producers
(“IPPs”) and retail electricity providers in the U.S., which has been
valued at a steep discount to the utility sector and broader market due to
supply/demand imbalances keeping U.S. electricity prices low.
* The company, however, has been a smart capital allocator, and in March 2023
acquired the nuclear generation assets of Energy Harbor, which served as the
catalyst for Third Point acquiring shares. 
* More recently, nuclear generation assets have come to be appreciated as a
reliable and clean source of power for data centre buildouts as the AI arms
race commences. 
* Third Point believes Vistra is in a good position to capitalize on these
trends, and it expects the discount applied to their assets to continue to
narrow as their business becomes increasingly essential to serving domestic
power demand.  
 
* 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.
 
* Alphabet	* During the first quarter, Third Point made a substantial
investment in Alphabet as the market worried about the impact of new AI
entrants on Google Search. 
* With Generative AI poised to take content creation costs to zero, much like
when the internet took distribution costs to zero, there will be a
proliferation of information. Against that backdrop, the Investment Manager
believes that Google Search will be increasingly important as a source of
truth. 
* In addition, Third Point is encouraged by marginal improvements to control
expense growth as well as decisive handling of employee unrest.
 
* TSMC	* During the first quarter, Third Point added to its investment in
TSMC, which it sees as the “toll road” of the semiconductor industry,
particularly for AI compute. 
* Today, TSMC derives a relatively small percentage of its revenue from AI
processors, largely from Nvidia, but Third Point believes that percentage will
rise quickly as AI compute broadens and as companies such as Amazon, Microsoft
and Meta all increasingly rely on TSMC to build their own chip designs.
* The main concern weighing on TSMC shares is Intel’s entry into the
semiconductor foundry market, however, Third Point believes it will prove
difficult for Intel to challenge TSMC’s dominance.
 
* Advance Auto Parts	* Third Point established an activist position in Advance
Auto Parts in the fourth quarter of 2023 and subsequently went public with the
position in the first quarter of 2024. 
* Advance operates in the highly attractive auto aftermarket industry, which
has proven resilient in various consumer cycles and is currently supported by
increasing vehicle complexity, a growing and aging fleet of vehicles on the
road, and supply and affordability challenges. 
* While Advance has significantly underperformed peers over the past several
years, which presented a compelling entry point, Third Point’s work suggests
that many of these shortcomings are not structural. 
* Feedback has been consistent that a lack of relevant industry experience in
key roles has led to years of inconsistent execution. Third Point believes
that a portion of the performance gap versus peers can be closed with new
leadership and advisors in place. 
* Following engagement with Third Point, the company recently added three new
directors, who each bring unique and highly relevant industry experience that
the previous Board lacked. 
* Third Point believes that even minor operational improvements at the core
will drive considerable upside to shares, and it is confident that the company
now has the right leadership in place to deliver.
 

 

 

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 $600 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 43-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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