Third Point Offshore Investors Ltd.

[giofranchi]

http://seekingalpha.com/article/1377541-why-yahoo-is-worth-34

 

giofranchi

[giofranchi]

April 2013 Monthly Report

 

giofranchi

2013-4-April-Monthly-Report-TPOI.pdf

[giofranchi]

TPOU is having another stellar year: +15.2% so far. And the stock price is gradually closing the gap to NAV. Yet, it still should rise 13.3%, before trading at NAV.

 

giofranchi

2013-05-08-Estimated_NAV_Announcement.pdf

[giofranchi]

On last November 25, 2012, rjstc wrote me the following message:

 

Giofranchi, thank you for your nice response. I also see nothing wrong with unlocking value in entrenched company's. could you imagine the wealth effect in say Japan if Icahn & a few others could get past the entrenched establishment.

 

Barely 6 months later, Mr. Loeb is trying to take precisely that course of action with the letter in attachment: very nice call, Ron!! ;)

 

giofranchi

Dan-Loeb-Third-Point-Letter-to-Sony1.pdf

[muscleman]

TPOU is having another stellar year: +15.2% so far. And the stock price is gradually closing the gap to NAV. Yet, it still should rise 13.3%, before trading at NAV.

 

giofranchi

 

How do I buy the US shares? TPOU seems to be a symbol in LON exchange.

[tripleoptician]

Hi muscleman

 

You can buy on the OTC markets on symbol TPNTF. Nice 7% pop today....looks like discount to NAV might be narrowing.

[muscleman]

Hi muscleman

 

You can buy on the OTC markets on symbol TPNTF. Nice 7% pop today....looks like discount to NAV might be narrowing.

 

Yeah. It is narrowing quickly.

I am confused why the US shares are listed in LON?

 

I have never bought any closed investment firm's shares before. Is there any difference in filing taxes in the US between normal stock companies and closed investment firms' shares?

[tripleoptician]

My understanding is that it is listed as a vehicle on the LSE with 3 different share class forms for USD, EURO, British pounds. My brokerage wasn't setup for the LSE so I bought TPNTF on the OTC.

 

Are you referring to your individual tax filing or the company's filing? If its your own filing you are referring to, it acts identically to trading individual securities for capital gains  +\- distributions which Third Point has given special dividends in the past.

[muscleman]

My understanding is that it is listed as a vehicle on the LSE with 3 different share class forms for USD, EURO, British pounds. My brokerage wasn't setup for the LSE so I bought TPNTF on the OTC.

 

Are you referring to your individual tax filing or the company's filing? If its your own filing you are referring to, it acts identically to trading individual securities for capital gains  +\- distributions which Third Point has given special dividends in the past.

 

My own filing. Ok. That sounds good.

 

I thought all stocks trading on LON has to be GBP currency based. I didn't know TPOU is USD based. How could that happen? That is so weird.

 

Why don't you get a broker that can trade in international exchanges? It is much better to do it that way.

[tripleoptician]

Why would it be much better? The liquidity appears the same and it tracks TPOU perfectly in its NAV. It's the same company regardless...

 

[muscleman]

Why would it be much better? The liquidity appears the same and it tracks TPOU perfectly in its NAV. It's the same company regardless...

 

There is far less volume.

https://www.google.com/finance?q=OTCMKTS%3ATPNTF&ei=dJaVUdjiG8OuiAK0qQE

This thing didn't trade between May 8th and 15th.

[muscleman]

This is a no brainer when it was trading at 20% discount.

But right now the discount gap is quickly closing. Given this fund has 11 Bn assets, I doubt if Dan Leob can continue to grow at 17% a year.

Therefore I think other investments will be more attractive right now. For example, EXO.MI.

[luck]

hi muscleman- can't figure out who to use to buy international stocks.  my broker doesn't even trade anything non-adr.  any recommendations on a broker for buying international stocks on a foreign exchange? exorf on the orc is massively illiquid it seems.  also, do you know what the tax considerations are for buying exor on the italian exchange?  thx in advance.

[muscleman]

hi muscleman- can't figure out who to use to buy international stocks.  my broker doesn't even trade anything non-adr.  any recommendations on a broker for buying international stocks on a foreign exchange? exorf on the orc is massively illiquid it seems.  also, do you know what the tax considerations are for buying exor on the italian exchange?  thx in advance.

 

I started a separate thread for that discussion. Let's not distract people who are interested in TPOU.

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/which-stock-broker-do-you-use/

[giofranchi]

This is a no brainer when it was trading at 20% discount.

But right now the discount gap is quickly closing. Given this fund has 11 Bn assets, I doubt if Dan Leob can continue to grow at 17% a year.

Therefore I think other investments will be more attractive right now. For example, EXO.MI.

 

Hi muscleman,

I partially, but not fully, agree with you.

Mr. E. H. Harriman was used to say:

I am not interested in 10%; I want something that will grow.

So, after appreciating from $10.45 (my purchase price) to $14.80 in 8 months, and in the meantime also distributing a 5% special dividend at year end 2012, for a total return of little less than 50%, TPOU is now trading at a 9% discount to NAV ($16.31, see file in attachment). It is obvious that, if you are interested in a “quick and easy” 10%, EXO.MI at a wider discount to NAV might be a better choice than TPOU. Vice versa, if you are interested in something that will grow, I still prefer TPOU.

I simply think “the opportunistic son of a bi…” business model of Mr. Loeb is far superior to the EXOR’s more static business model. After closing the gap to NAV, sincerely I don’t see how EXOR could grow as fast as Third Point.

And Third Point will grow:

 

1) After increasing NAV per share 22.5% last year, it has already increased NAV per share 18.4% in 2013, both far above its long term track record, despite the $13 billion under management.

 

2) Mr. Loeb focuses on “special situations” of any kind: in stocks, in bonds, in real estate, in currencies, etc. The markets he operates in are huge! And compared to them $13 billion are just a flimsy sum of money.

 

3) When AUM will actually start to become too large (many years from now) and therefore to impair results, Mr. Loeb will give money back to shareholders through special dividends. For those who reinvest the dividends, TPOU might still continue to be a compounding machine.

 

So, I prefer EXOR right now as a trading opportunity, while I still prefer TPOU as a long-term investment.

 

giofranchi

2013-05-15-Estimated_NAV_Announcement.pdf

[muscleman]

This is a no brainer when it was trading at 20% discount.

But right now the discount gap is quickly closing. Given this fund has 11 Bn assets, I doubt if Dan Leob can continue to grow at 17% a year.

Therefore I think other investments will be more attractive right now. For example, EXO.MI.

 

Hi muscleman,

I partially, but not fully, agree with you.

Mr. E. H. Harriman was used to say:

I am not interested in 10%; I want something that will grow.

So, after appreciating from $10.45 (my purchase price) to $14.80 in 8 months, and in the meantime also distributing a 5% special dividend at year end 2012, for a total return of little less than 50%, TPOU is now trading at a 9% discount to NAV ($16.31, see file in attachment). It is obvious that, if you are interested in a “quick and easy” 10%, EXO.MI at a wider discount to NAV might be a better choice than TPOU. Vice versa, if you are interested in something that will grow, I still prefer TPOU.

I simply think “the opportunistic son of a bi…” business model of Mr. Loeb is far superior to the EXOR’s more static business model. After closing the gap to NAV, sincerely I don’t see how EXOR could grow as fast as Third Point.

And Third Point will grow:

 

1) After increasing NAV per share 22.5% last year, it has already increased NAV per share 18.4% in 2013, both far above its long term track record, despite the $13 billion under management.

 

2) Mr. Loeb focuses on “special situations” of any kind: in stocks, in bonds, in real estate, in currencies, etc. The markets he operates in are huge! And compared to them $13 billion are just a flimsy sum of money.

 

3) When AUM will actually start to become too large (many years from now) and therefore to impair results, Mr. Loeb will give money back to shareholders through special dividends. For those who reinvest the dividends, TPOU might still continue to be a compounding machine.

 

So, I prefer EXOR right now as a trading opportunity, while I still prefer TPOU as a long-term investment.

 

giofranchi

 

I see. That makes sense. Thank you! :)

[giofranchi]

I would also add that Mr. Loeb needs a lot of capital: how else could he implement his activist strategy? To be successful at what he did with Yahoo and what he is trying to do now with Sony, he needs enough capital to control a significant portion of the shares outstanding, then to ask for board seats, and finally to agitate for changes. And still without betting the whole fund on a single idea!

 

giofranchi

[giofranchi]

Hedge funds return ytd.

 

giofranchi

[Yours Truly]

If I purchase shares via TPNTF, should I be comparing its price to the USD shares NAV?

 

I'd love to partner with a great capital allocator such as Loeb and co.

[giofranchi]

If I purchase shares via TPNTF, should I be comparing its price to the USD shares NAV?

 

I'd love to partner with a great capital allocator such as Loeb and co.

 

Sorry, cannot help you... I bought TPOU on the LSE.

 

giofranchi

[muscleman]

Is there any way to find the historical NAV of this fund?

I see the share price dropped to as low as $3.4 in 2009, but their 2009 Q1 letter said they lost only 2.2% versus S&P's 11%.

I guess the NAV discount was huge at that time, but I would like to check if Dan Leob did a good job preserving capitals during that period.

 

Overall, I think it is a very good idea to allocate a good chunk of the portfolio into event driven funds like this one because its performance is usually not as tightly linked to the stock index.

[giofranchi]

Is there any way to find the historical NAV of this fund?

I see the share price dropped to as low as $3.4 in 2009, but their 2009 Q1 letter said they lost only 2.2% versus S&P's 11%.

I guess the NAV discount was huge at that time, but I would like to check if Dan Leob did a good job preserving capitals during that period.

 

Overall, I think it is a very good idea to allocate a good chunk of the portfolio into event driven funds like this one because its performance is usually not as tightly linked to the stock index.

 

During the financial crisis NAV reached a maximum of $10.02 on 18th June 2008, before decreasing to a minimum of $5.83 on 22nd April 2009 (see files in attachment): a -41.8% loss. So, Mr. Loeb definitely did not perform well during the financial crisis. He was not alone! :)

 

giofranchi

6-20-08-net-asset-values.pdf

4-24-09-net-asset-values.pdf

[muscleman]

Is there any way to find the historical NAV of this fund?

I see the share price dropped to as low as $3.4 in 2009, but their 2009 Q1 letter said they lost only 2.2% versus S&P's 11%.

I guess the NAV discount was huge at that time, but I would like to check if Dan Leob did a good job preserving capitals during that period.

 

Overall, I think it is a very good idea to allocate a good chunk of the portfolio into event driven funds like this one because its performance is usually not as tightly linked to the stock index.

 

During the financial crisis NAV reached a maximum of $10.02 on 18th June 2008, before decreasing to a minimum of $5.83 on 22nd April 2009 (see files in attachment): a -41.8% loss. So, Mr. Loeb definitely did not perform well during the financial crisis. He was not alone! :)

 

giofranchi

 

Not many people did well during that crisis, though I heard that event driven funds tend to have less correlation to the market.

So in 2008, this fund was trading at a premium to NAV. Since then, it was trading at a discount to NAV.

This is interesting because I thought all close end investment funds trade at a discount to NAV.

 

BTW, regarding your thoughts on EXO, I doubt if they will hold Fiat forever. They are long term investors, but they do get new investments from time to time. They mentioned recently that they just found a new investment to allocate a large sum of money to.

 

Does BRK hold KO and AMEX and GEICO forever? It seems yes to me too, but this doesn't mean they can't do well with this strategy.

 

If a business has 10% ROE, and I can buy at 50% of book value, then I get 20% of return per year forever. Is that bad? It is not easy to dump this one and find another business that returns 20% per year. :)

[giofranchi]

BTW, regarding your thoughts on EXO, I doubt if they will hold Fiat forever. They are long term investors, but they do get new investments from time to time. They mentioned recently that they just found a new investment to allocate a large sum of money to.

 

Does BRK hold KO and AMEX and GEICO forever? It seems yes to me too, but this doesn't mean they can't do well with this strategy.

 

Of course not! I am the one in the first place to invest, and not to trade! But FIAT is no KO, AMEX, or GEICO. I understand FIAT as a trading opportunity, when its shares are at very depressed price levels. But not as a long term investment.

 

If a business has 10% ROE, and I can buy at 50% of book value, then I get 20% of return per year forever. Is that bad? It is not easy to dump this one and find another business that returns 20% per year. :)

 

Unfortunately, a reliable 10% ROE each year is not consistent with the history of FIAT. In Italy it is very well known that FIAT would have lost money more often than not throughout its history, if it hadn’t been repeatedly bailed out by the government… I am not saying the future will be the same. On the contrary: it will probably be very much different! But I don’t have any particular insight into the auto business, I have never liked it much, and I have never made the effort to understand it well. Poor history of profitability for the business + lack of knowledge on my part about the industry = I stay away.

 

giofranchi

 

[giofranchi]

May 2013 Monthly Report

 

giofranchi

2013-5-May-Monthly-Report-TPOU.pdf