Dan Loeb’s Third Point Builds Positions in Alibaba, JD.com

(Bloomberg) -- Dan Loeb's Third Point said it took advantage of jitters around China's relationship with Hong Kong and the U.S. to build out its e-commerce exposure with new positions in Alibaba Group Holding Ltd. and JD.com Inc. during the second quarter.

Those holdings add to a long position the fund started building in Amazon.com Inc. in March.

“Our outlook for Alibaba and the broader Chinese e‐commerce market is bright,” Loeb said in a letter to investors Thursday.

He said he expected both e-commerce companies to continue using their scale to increase revenue through targeted advertisements. He said he was also excited by the potential of some of Alibaba's other businesses. That includes the planned initial public offering of Ant Group, which is 33% owned by Alibaba.

The activist investor also discussed his long position in the Walt Disney Co. for the first time since it was disclosed in May. The sell-off of the stock due to concerns around the closure of theme parks and movie theaters provided an attractive entry point at a time when it is accelerating its streaming plan, he said.

“Streaming is Disney's biggest market opportunity ever,” Loeb said. That market is potentially worth $500 billion over a growing base of 750 million homes with broadband outside of China. Disney's shares have gained 20% since Third Point disclosed its stake.

Disney's dominant position in the media landscape sets the company up nicely to to grab a “meaningful chunk” of the streaming market, he said. He also called its plans to release its film “Mulan” on Disney+ a “defining moment” for the company.

Amazon Position

Loeb said he also initiated position in Amazon in March, a stock he said typically traded outside of Third Point's valuation range. He said it was undervalued due the acceleration of the adoption of e-commerce and cloud computing in the pandemic.

“Even as shopping patterns normalize, we believe that e‐commerce penetration has structurally ratcheted up and that Amazon's share gains will be sticky,”

Third Point also recently participated in a common equity offering for PG&E Corp., which exited bankruptcy last month. Loeb said the company's shares trade at a significant discount and that many of the legacy liabilities were addressed in the restructuring.

In May, Loeb returned to his duties as sole chief investment officer after the departure of Munib Islam.

He said he also began to drive his team to make moves that better reflect the current environment. Third Point returned 10.8% on its investments in the second quarter but was still down 7.2% year to date.

“These changes to the organization and our process are having the impact I desired: significantly increasing the volume and quality of actionable ideas and thereby creating a more dynamic and diversified portfolio with improved performance,” he said.

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