Dan Loeb is one of the most successful hedge fund managers. The Founder of New York-based Third Point LLC, which manages nearly $14 billion in assets, has made a name for himself as an activist investor. Some of his big wins on Wall Street have come from launching activist campaigns against corporate boards and shaking up companies in various industries and countries.
Over the years, the hedge fund manager has relied on grassroots campaigning techniques in the race to unlock full value in some plays on Wall Street. The technique entails letter writing that goes a long way in influencing company management and triggering investors’ reactions. With a net worth of about $3.5 billion, there was a time Loeb was best known for lambasting CEOs and directors with public letters and anonymously on websites.
While his battles with corporate boards often turned nasty, they often bore fruit in unlocking unseen value. Loeb and his fund have been advocates of the technique, which helps high-quality firms unlock their true growth potential by pursuing new opportunities and markets. Loeb has enjoyed tremendous success by pushing management teams to look deeper at their businesses and implement changes that lead to greater long-term value. Such activist campaigns have often resulted in mergers, acquisitions, divestitures and management changes.
In 2015, he was forced to defend his activist investment strategy after facing criticism from BlackRock CEO Larry Fink and Democratic presidential candidate Hillary Clinton. In his letter to investors, he insisted the criticism was outdated as his stratify was far better than the corporate raider of the 1980s.
Likewise, Loeb has kept up with the stock market's rise with his activism in various companies, depicted by Third Point's annualized return of just under 16% since its inception. Investment in medical supplies company Baxter International bore fruits with returns of over 45% in 2017.
The activist investor also made waves by taking a position on DowDuPont and started pushing to have the company split into Dow and DuPont. Eventually, the company did spin off its materials science Division into Dow Company after Loeb had said it had the potential to unlock up to $20 billion value.
In 2020 Third Point took out a position in chipmaker Intel Corporation (NASDAQ:INTC) and pushed the company to attract fresh talent to reinvigorate its growth prospects. With the company struggling to create technological advantages and playing catch-up with rivals, the CEO had to go and was replaced in 2021 by Pat Gelsinger. These changes didn't help Intel much as the stock lost a third of its value since Loeb's involvement.
In the recent past, Loeb has reiterated that he sees nearly $1 trillion of untapped value in Amazon.com, Inc. (NASDAQ:AMZN) through its e-commerce and Amazon Web Services cloud unit. While it is still unclear whether Loeb will be pursuing an activist campaign against Amazon, things could change as the stock is one of Third Point's most significant holdings, valued at over $784 million.
In addition, to activist campaigns, the hedge fund manager has recently lamented how meme stock traders have made short selling a problematic job. The meme crowd often drives stocks up, all to squeeze short sellers, of which Third Point is also a player.
“Fundamental analysis is increasingly taking a back seat to monitoring daily option expiries and RedDirt message boards, as evidenced by the numerous short squeezes and manipulations of heavily shorted stocks such as AMC and GameStop in 2021 and others this year,” Third Point LLC’s chief executive wrote.
For instance, Tupperware Brands Corporation (NYSE:TUP), Nikola Corporation (NASDAQ:NKLA), and Yellow Corporation (NASDAQ:YELL) prices have been pumped up, sticking short sellers with losses of over $400 million over the past two months. Concerned by the meme crowd and tactics, Loeb has reiterated that his days as a big gambler against individual stocks are over.
Long-Term Returns of Dan Loeb's Activist Targets
Dan Loeb of Third Point
Compared to previous years, Loeb is having a challenging 2023, with his fund lagging the broad market by about 20%. Third Point was only up by 1.1% in the second quarter bringing its 2023 losses to 3%. The underperformance stems from underinvestment in the magnificent 7 stocks of Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), Apple Inc. (NASDAQ:AAPL), Amazon, Meta Platforms, Inc. (NASDAQ:META), Tesla, Inc. (NYSE:TSLA), and Alphabet Inc. (NASDAQ:GOOG) that have been in fine form year round.
“Managers who have had less than 25% of their funds in these stocks have found it challenging to keep up with ‘the market,” Loeb told his investors.
Nevertheless, the hedge fund manager has ramped up his position on Amazon, Nvidia, and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in the recent past after lamenting on missing out big on the tech rally boom.
Our Methodology
There is no doubt that Loeb is one of the most successful hedge fund managers. He has always deployed capital in world-class companies trading at bargain basement prices. However, his returns have always varied depending on the company, the industry, and prevailing market conditions. While some picks have performed beyond expectations, others have proved to be big disappointments.
We have compiled a list of some of Loeb’s biggest activist plays and their returns over the years. The stocks have been compiled from the SEC filings. The stocks are ranked chronologically from when the activist investor Loeb bought stakes in the company and embarked on a proxy fight.
Emmis Communications Corporation (NASDAQ:EMMS) is a diversified media company specializing in radio broadcasting. It also owns and operates several technology entities, including television, broadcasting, and magazine broadcasting. Loeb's Third Point hedge fund developed a 7.9% stake in the company in 2005 and embarked on a proxy battle to unlock value.
Activist investor Dan Loeb saw Emmis Communications Corporation (NASDAQ:EMMS) as undervalued, given its strong market position and opportunities to improve its profitability. He demanded seats on the board and the appointment of new CEO Jeffrey Smulyan, who had announced plans to take the company private. You can read our coverage of this campaign here.
Loeb remained one of the most prominent CEO until 2010 and liquidated his stakes at a gain of 5%.
14. Smurfit-Stone Container Corporation
Stock Return: 54.1%
Activist Investment: 2011
Smurfit-Stone Container Corporation was a significant producer of paper and paperboard packaging products in North America, with operations in 18 countries and about 21,000 employees. The company made various types of packaging, such as boxes, cartons, bags, and displays, from paperboard and recycled paper. Smurfit-Stone Container Corporation was created in 1998 by merging two industry leaders: Stone Container Corporation and Jefferson Smurfit Corporation. In 2011, Third Point LLC was part of a consortium of activist investors that came together to block the company's proposed takeover for $3.5 billion by Rock Ten Co.
The hedge funds argued that the deal substantially undervalued the company and would not generate optimum shareholder value. The deal valued the company at $35 a share. The deal closed in May of 2011, and Loeb generated a return of 54.1%.
13. Yahoo Inc.
Stock Return: 114%
Activist Investment: 2011
Yahoo is a web portal and online media company that offers various services such as emails, news, search, and social networking. Activist investor Loeb first bought a 5% stake in the company in 2011 and reiterated plans for a proxy battle in the race to engage management and the board. He criticized the board for its lack of digital strategy, focus on high-value lots, and failure to compete against Google on advertising.
He demanded the resignation of Scott Thompson, who was replaced by Marissa Mayer in 2012. Loeb's activist campaign paid off as a year later; the company announced plans to buy nearly two-thirds of his shares at a market price of $29.11, translating to a 114% gain on the investment.
Enphase Energy, Inc. (NASDAQ:ENPH) designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry. Dan Loeb first got involved in the energy company in 2012 by purchasing shares at an average price of $7.34 a share. Through Third Point, the hedge fund manager increased stakes in the company and became the largest shareholder with a 14.35% stake.
The acquisition came as Loeb saw Enphase Energy, Inc. (NASDAQ:ENPH) undervalued, given its solid global franchise and opportunities to boost profit margins. He consequently pushed for two board seats and pushed for a new CEO. His activism helped improve the company's operation efficiency, capital allocation and corporate governance. He also pushed for acquisitions, including SunPower's microinverter business, in 2018.
Enphase Energy, Inc. (NASDAQ:ENPH) has turned out to be one of Loeb’s greatest investments, with gains of over 1800% over the past ten years.
Sotheby’s (NYSE:BID) is one of the oldest and largest auction houses and brokers of art, collectibles, jewelry, and real estate. Loeb acquired stakes in the company in 2013 and accused the company of a lack of digital strategy and its failure to compete against rival Christie in the contemporary and modern art market. As part of his activism, Loeb called for the resignation of CEO William Ruprecht, who he believed was being overpaid.
Loeb lodged a proxy fight and won three board seats in Sotheby’s (NYSE:BID). He remained one of the largest shareholders until 2019, when the company agreed to be acquired.
In 2019, Patrick Drahi acquired the company for $3.7 billion, going private and ceasing to trade in the New York Stock Exchange. The sale created a windfall for the activist investor, seeing his investment appreciate by about 40%.
Through its subsidiaries, Baxter International Inc. (NYSE:BAX) designs, develops and markets a portfolio of healthcare products. Its products are designed to help people with kidney diseases and other serious and long-term health problems. Loeb acquired stakes in the company in 2015, valued at about $2 billion, and asked for two board seats.
The activist investor also wrote a letter to the CEO, Robert Parkinson, informing him that Third Point had become the biggest investor and was pushing for a leadership change. The hedge fund also pushed for a spinoff of Baxter International Inc. (NYSE:BAX)’s biopharmaceutical division to unlock maximum shareholder value.
In 2018 Third Point sold a 22.1% stake in Baxter International Inc. (NYSE:BAX) at $68.62 a share for a gain of 106%.
Nestlé S.A. (NYSE:NSRGY) is a Swiss multinational company specializing in food and drink processing. The company's mission is to use food as a force for good, improving the well-being of people and the planet for the future. In 2017 Loeb confirmed that Third Point owned 40 million shares in the company valued at $3.5 billion, making it the sixth largest shareholder.
With the investment, Loeb reiterated that Nestlé S.A. (NYSE:NSRGY) must do more to reshape its product portfolio and adapt to changing consumer tastes and competition. Barely a year later, had Loeb penned a 34-page presentation urging the board to sell more of the business that does not fit and untangle its corporate structure? The activist investor called for the company to split into three units, sell its stakes in L-Oreal, and pursue buybacks.
Nestlé S.A. (NYSE:NSRGY) obliged some of the requests, including increasing dividends and buybacks, including selling its skin unit and its US ice scream business. The result was the stock price increased by 40% since Loeb invested in the company.
Campbell Soup Company (NYSE:CPB) manufactures and markets food and beverage products with its subsidiaries. It operates through meals and beverages, and snacks segments. Third Point increased its stake in the company from 5.6% to 6.98 % in 2018, which saw the hedge fund get two seats on the board.
Loeb had initiated a plan to get the entire board replaced as part of his activism play, unhappy with Campbell Soup Company (NYSE:CPB)’s performance. The activist investor also pushed for the sale of the company to maximize shareholder value. When Loeb exited his stakes in 2020, he had amassed a gain of 26% on the investment.
Global Blue Group Holding AG (NYSE:GB) is a Swiss company that has made a name for itself by offering tax-free shopping services to tourists. The company operates a network of kiosks and stores where customers can claim sales tax refunds while flying. Dan Loeb first got involved with the company in 2020.
Global Blue Group Holding AG (NYSE:GB) was the subject of an acquisition bid by Far Point, a blank check company backed by Loeb and set up to acquire financial technology firms. However, in the aftermath of the pandemic, Loeb urged investors to block the deal citing the negative impact of the pandemic on Global Blue’s business.
Loeb had raised concerns about Global Blue Group Holding AG (NYSE:GB)'s prospects as the pandemic had decimated international travel and luxury shopping.
Likewise, Loeb's investment in Global Blue is down by about 37%.
Royal Dutch Shell is a British multinational oil and gas company that explores for and extracts crude oil, natural gas, and natural gas liquids; markets and transports oil and gas; produces gas-to-liquids fuels and other products. In 2021, Loeb disclosed $750 million worth of stakes in the Anglo-Dutch company while reiterating plans to unleash trapped shareholders' value by forcing the company's breakup.
Loeb called for putting the company’s assets into a separate form focused on returning cash to shareholders while also coming up with a renewable energy company to succeed independently. Royal Dutch Shell is up by about 30% since Third Point confirmed its stakes in the company.
