Third Point increased Shell stake in Q1, added Glencore long position
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Third Point, the hedge fund run by Dan Loeb, increased its position in Shell Plc (NYSE:SHEL) in Q1 after it first disclosed a stake in October and called for the oil giant to separate into multiple standalone companies.
Third Point is engaged in talks with Shell (SHEL) management, board members, and other holders, as well as "informal" talks with financial advisors, according to the hedge fund's Q1 letter to investors released Friday. Discussions among the parties have been "constructive."
"We have reiterated our view that Shellâs portfolio of disparate businesses ranging from deep water oil to wind farms to gas stations to chemical plants is confusing and unmanageable," Loeb wrote in the letter. "Most investors we have discussed this with agree that the company would be more successful over the long term with a different corporate structure."
Loeb also said current geopolitical events highlight importance of Shell's LNG business, the largest in the world outside of Qatar, to help ensure energy security for Europe.
"In our view, the value of this business has increased dramatically since our original investment," Loeb added.
Third Point also disclosed a new long position in miner Glencore Plc (OTCPK:GLCNF). The hedge fund argued that nickel and copper are "critical components" to the transition to renewable energy and the two metals are "undergoing a substantial acceleration in demand that will outpace supply growth as miners maintain capital discipline after a decade of poor returns."
"With a new management team in place, an improved ESG profile, very strong cash returns to shareholders, and government settlements, we believe that Glencore can close the substantial 28% discount at which it trades to other global miners," Loeb wrote.
Third Point listed the top five winners for Q1 were Shell (SHEL), EQT Corp. (EQT), Macro A, Macro B, and Zendesk (ZEN). The top five losers for the quarter were SentinelOne (S), Intuit (INTU) Upstart (UPST) Rivian (RIVN) and Cie Financiere Richemont SA (OTCPK:CFRHF).
Third Point's flagship Offshore fund fell 11.5% in Q1 vs the S&P 500s 4.6% decline.
Third Point's "beta-adjusted net equity exposure" dropped from 75% at the start of the year to 41% at the end of Q1 to 23% as of Thursday. Third Point exited several large equity positions and trimmed exposure to and "substantially hedged" its second largest and "most volatile" position. The fund also added to its single name shorts in Q1.
"Today, our net exposure is lower and buying power higher than at any time during the last 10 years," Loeb wrote.
Third Point initiated positions in oil and natural gas companies in Q1, as well as in other materials companies that the fund believes will benefit from inflation, supply shortages, and the adoption of EVs.
For April, the fund fell 1% versus losses of 8% and 13% for the S&P and NASDAQ indices, respectively.
"Even after dramatic declines, it is difficult to call a bottom in the high-growth, high-valuation end of the tech sector, especially given that many of these companies relied on stock-based compensation and controversial accounting and reporting techniques," Loeb wrote.
Recall February, Dan Loeb's Third Point Q4 winners include Upstart, Disney and PG&E, praises Intel.