Third Point’s Dan Loeb reflects on tough first half for his hedge fund, which lags the market by 20%
Dan Loeb is having an abysmal year. His flagship Third Point hedge fund is lagging the broad market by 20%. Third Point's flagship offshore fund was up only 1.1% in the second quarter, bringing its 2023 loss to 3%, according to his latest investor letter. That's significantly behind the S & P 500, which rallied more than 8% last quarter and is up nearly 18% year to date. The widely followed manager said the culprit was how underinvested he's been in the "Magnificent 7" mega-cap growth stocks — Microsoft , Nvidia , Apple, Amazon, Meta , Tesla and Google's Alphabet — the group that has led the market rally all year. "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. "Although we had exposure to Microsoft, AMD, Amazon and Google, the positions were undersized and profits offset by losses from market/basket hedges, single name shorts and several poorly performing long equity positions." Loeb said he correctly called the economy's disinflation in the beginning of the year, based on easing apartment rental data. But instead of betting on tech, he chose to double down on cheap, cyclical names he thought would benefit from the stabilizing economy. "Rather than expressing this constructive view by investing heavily in high-quality tech companies with earnings growth (an obvious choice in hindsight), we primarily committed capital to value situations which have since underperformed," Loeb said. The Russell 1000 Growth index is up nearly 30% this year, whereas its value counterpart has gained only 6%. The hedge fund manager revealed his biggest losers this year included Alibaba , Danaher, Catalent and International Flavors & Fragrances .