Daniel Loeb Buys Amazon and Taiwan Semiconductor, Exits Colgate-Palmolive

Daniel Loeb (Trades, Portfolio), leader of Third Point, released his equity portfolio for the second quarter earlier this week.

Picking stocks using an event-driven, value-oriented approach, the guru’s New York-based firm is known for entering activist positions in underperforming companies with a catalyst that will help unlock value for shareholders.

In his shareholder letter for the quarter, Loeb recalled that in October, the firm “correctly observed that markets bottom when economic data looks most bleak, and pessimism is high.”

“At that time, inflation still seemed to be accelerating, rates were rising, and the consensus belief was that only a powerful medicine of Fed hikes and a severe recession could break the ‘fever’ of relentless inflation,” he wrote. “Instead, we saw the first signs of disinflationary green shoots in easing apartment rental data and concluded that the economy was headed in the right direction. Unfortunately, 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.”

He added, “Looking ahead, we see continued favorable economic conditions driven by declining inflation, which should eventually lead to less hawkish monetary policy.”

Keeping these considerations in mind, the 13F filing showed the guru entered 11 new positions during the three months ended June 30, exited 10 stocks and added to or trimmed a slew of other existing investments. Notable trades included new holdings in Amazon.com Inc. (AMZN, Financial), Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial) and Nvidia Corp (NVDA, Financial), a reduced bet on Alphabet Inc. (GOOGL, Financial) and the divestment of Colgate-Palmolive Co. (CL, Financial).

Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.

Amazon

Having previously sold out of Amazon (AMZN, Financial) a year ago, the guru entered a new 4.10 million-share stake, allocating 7.83% of the equity portfolio to the position. The stock traded for an average price of $114.02 per share during the quarter.

It is now his third-largest holding.

The Seattle-based e-commerce company has a $1.40 trillion market cap; its shares were trading around $135.94 on Wednesday with a price-earnings ratio of 107.04, a price-book ratio of 8.31 and a price-sales ratio of 2.62.

The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.

At 94 out of 100, the GF Score indicates the company has high outperformance potential. While it received high ratings for profitability, growth, value and momentum, the financial strength rank is more moderate.

Of the gurus invested in Amazon, Baillie Gifford (Trades, Portfolio) has the largest stake with 0.40% of its outstanding shares. Ken Fisher (Trades, Portfolio), Dodge & Cox, Frank Sands (Trades, Portfolio), Al Gore (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), the Harbor Capital Appreciation Fund (Trades, Portfolio) and Warren Buffett (Trades, Portfolio), among others, also have notable holdings.

Taiwan Semiconductor Manufacturing

Loeb invested in 2.45 million shares of Taiwan Semiconductor Manufacturing (TSM, Financial), dedicating 3.62% of the equity portfolio to the stake. Shares traded for an average price of $93.07 each during the quarter.

It is now his seventh-largest position.

The Taiwanese semiconductor manufacturer has a market cap of $475.80 billion; its shares traded around $91.74 on Wednesday with a price-earnings ratio of 15.20, a price-book ratio of 4.43 and a price-sales ratio of 6.33.

According to the GF Value Line, the stock is significantly undervalued currently.

The GF Score of 100 implies the company has high outperformance potential on the back of solid ratings for all five criteria.

With a 0.57% stake, Fisher is Taiwan Semiconductor’s largest guru shareholder. Other top guru investors include First Eagle Investment (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Laffont, Steve Mandel (Trades, Portfolio), Frank Sands (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Ron Baron (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.

Nvidia

The investor picked up 500,000 shares of Nvidia (NVDA, Financial), giving the holding 3.10% space in the equity portfolio. During the quarter, the stock traded for an average per-share price of $331.15.

It is now his ninth-largest position.

The chipmaker headquartered in Santa Clara, California has a $1.07 trillion market cap; its shares were trading around $435.07 on Wednesday with a price-earnings ratio of 226.60, a price-book ratio of 43.86 and a price-sales ratio of 41.96.

Based on the GF Value Line, the stock appears to be significantly overvalued currently.

The GF Score of 83 means the company has good outperformance potential, driven by high ratings for profitability, growth and financial strength and low momentum and value ranks.

Baillie Gifford (Trades, Portfolio) is Nvidia’s largest guru shareholder with a 0.63% stake. The stock is also being held by Fisher, Harbor Capital, Laffont, Sands, PRIMECAP Management (Trades, Portfolio), Simons’ firm, Steven Cohen (Trades, Portfolio) and David Tepper (Trades, Portfolio), among others.

Alphabet

Loeb curbed his stake in Alphabet (GOOGL, Financial) by 70%, selling 3.33 million Class A shares. The transaction had an impact of -5.64% on the equity portfolio. The stock traded for an average price of $114.92 per share during the quarter.

He now holds 1.43 million shares, which represent 2.50% of the equity portfolio. GuruFocus estimates he has gained 22.43% on the investment so far.

The Mountain View, California-based communications services company, which owns the Google search engine, YouTube and a number of other businesses, has a market cap of $1.63 trillion; its Class A shares were trading around $128.72 on Wednesday with a price-earnings ratio of 27.27, a price-book ratio of 6.09 and a price-sales ratio of 5.82.

The GF Value Line suggests the stock is modestly undervalued currently.

Supported by high ratings for financial strength, profitability, growth and momentum, the GF Score of 98 indicates the company has high outperformance potential. The value rank is more moderate, however.

Holding a 0.34% stake, Fisher is the largest guru shareholder of Alphabet’s Class A stock. PRIMECAP Management (Trades, Portfolio), Dodge & Cox, Harbor Capital, Nygren, Laffont and Hotchkis & Wiley, among others, also have notable positions in the stock.

Colgate-Palmolive

Impacting the equity portfolio by -13.59%, the guru dumped all 11.05 million shares of Colgate-Palmolive (CL, Financial). During the quarter, shares traded for an average price of $77.37 each.

GuruFocus data shows Loeb lost an estimated 1.44% on the investment over its lifetime. It was previously his second-largest holding.

The consumer goods manufacturer, which is headquartered in New York, has a $61.41 billion market cap; its shares were trading around $74.26 on Wednesday with a price-earnings ratio of 41.27 and a price-sales ratio of 3.34.

According to the GF Value Line, the stock is modestly undervalued.

The GF Score of 79 indicates the company is likely to have average performance going forward due to high ratings for profitability and momentum and more moderate growth, financial strength and value ranks.

First Eagle Investment (Trades, Portfolio) is the company’s largest guru shareholder with a 1.34% stake. Colgate-Palmolive is also being held by Simons’ firm, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Yacktman Asset Management (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio) and the T Rowe Price Equity Income Fund (Trades, Portfolio).

Additional trades and portfolio performance

Other new positions Loeb established during the quarter were in Intercontinental Exchange Inc. (ICE, Financial), Activision Blizzard Inc. (ATVI, Financial), Uber Technologies Inc. (UBER, Financial), Option Care Health Inc. (OPCH, Financial) and Horizon Therapeutics PLC (HZNP, Financial).

The guru’s $6.83 billion equity portfolio, which is composed of 45 stocks, is most heavily invested in the technology, consumer cyclical, utilities and health care sectors.

Third Point posted a return of -21.7% for 2022, underperforming the S&P 500’s -18.11% return.