REG-Third Point Investors Ltd: Third Point Releases Q2 2024 Investor Letter

Third Point InvestorsAnnouncement

23/08/2024 14:45

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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