Hedge fund Third Point reducing single name short positions
Larry Busacca/Getty Images Entertainment
 Activist hedge fund Third Point is reducing the number of single-name short positions in its portfolio as the short-selling environment is "much more challenging" than it has been historically.
"While we have not abandoned short selling, we continue to reduce our single name short exposure in favor of market hedges and short baskets," Third Point CEO and Chief Investment Officer Dan Loeb wrote in a Q2 letter to investors on Monday.
Third Point has also reduced the position sizes of single short names, "limiting our vulnerability to short squeezes," Loeb wrote.
"Fundamental analysis is increasingly taking a back seat to monitoring daily option expiries and Reddit 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," Loeb wrote in the letter.
In Q2, Third Point's Offshore Fund rose 1.1%, and the fund is down 3% year-to-date. The top five winners for the quarter were Pacific Gas and Electric (NYSE:PCG), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), and Ferguson PLC (NYSE:FERG).
The top five losers for the quarter were Alibaba (BABA), Danaher (DHR), Catalent (CTLT), International Flavors & Fragrances (IFF), and a private position.
"Given this backdrop, and notwithstanding the market run to date, we see healthy upside in the valuations of our portfolio," Loeb wrote. "Certain pundits who bemoan high S&P valuations ignore the `kink in the curve' provided by AI and companies like Tesla and Nvidia, which skew the S&P multiple. We are finding many high-quality companies trading at reasonable valuations, especially when considering their prospective growth or specific transactions they are undergoing to unlock value." 
More on Third Point

Third Point First Quarter 2023 Investor Letter
Tracking Dan Loeb's Third Point Portfolio - Q1 2023 Update
Third Point Fourth Quarter 2022 Investor Letter
Dan Loeb's Third Point bets on UBS's transformative Credit Suisse deal
Dan Loeb's Third Point takes new stake in IFF, pares holding in SentinelOne