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Third Point Offshore Investors Ltd.


giofranchi
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I like Event-Driven, Value Investing. In what I regard as an overheated stock market, mostly due to the monetary policies of central banks around the world, that suppressed yield on so-called “safe-heaven” and prompted investors into riskier assets (the stock market), I like to go long something that has historically showed a low correlation to the stock market (S&P500).

Third Point Offshore (TPOU) is my firm’s third largest investment, yesterday it closed at $10,23, while NAV as at the close of business on the 5th of September 2012 was $12,70. TPOU is trading at a discount of 20% to NAV. Which doesn’t make sense for a company that can boast a 17% annualized return since inception in 1996.

 

I know that a “long/short equity + credit + macro + risk arbitrage” strategy won’t keep up with an euphoric stock market, and actually YTD TPOU is up only 7,3%, while the S&P500 is up 13,5%, but right now I am confident and willing to accept a lower return, in order to decrease stock market exposure. Obviously, far from me equating stock market exposure with risk: I equate stock market exposure with risk, only in what I still consider a secular bear for stocks and when stock market prices are high (at least, as far as can be inferred from historical observations).

 

I also know that Yahoo! is a big bet, but I have read anything Mr. Loeb has written about it, and I agree with his thesis. Yahoo! is Event-Driven, Value Investing: if Mr. Loeb’s vision proves to be successful (which I believe is the case), Yahoo! has great upside potential, otherwise it will continue to go nowhere or will go down. Anyway, at this point I don’t see Yahoo! stock price to be greatly affected by the general market behavior.

 

Finally, I also like the fact that AIG is now among TPOU’s top long positions: with all the good things I have read on this board about AIG, how could it be different?

 

giofranchi

2012-08-August-Monthly-Report-TPOU.pdf

2012-9-07-Estimated_NAV_Announcement.pdf

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Third Point Offshore (TPOU) is my firm’s third largest investment, yesterday it closed at $10,23, while NAV as at the close of business on the 5th of September 2012 was $12,70. TPOU is trading at a discount of 20% to NAV. Which doesn’t make sense for a company that can boast a 17% annualized return since inception in 1996.

 

~~~~

 

Finally, I also like the fact that AIG is now among TPOU’s top long positions: with all the good things I have read on this board about AIG, how could it be different?

 

giofranchi

 

giofranchi,...

 

thanks for posting.

 

and finally you are in AIG,... even with probably only some tiny percentages indirectly ;-)

 

http://holdings.nasdaq.com/asp/OwnerPortfolio.asp?FormType=OwnerPortfolio&CIK=0001040273&HolderName=THIRD+POINT+LLC

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berkshiremystery,

the link you posted is dated June 30, 2012. During the months of July and August Mr. Loeb must have increased TPOU's stake in AIG substantially. As of August 31, 2012, AIG is TPOU’s fourth largest position, after Yahoo!, Gold, and Apple. Certainly, my firm’s stake in AIG is still tiny, but a little less so than it was last June! ;)

 

giofranchi

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  • 3 months later...
  • 4 weeks later...

Already up 6% for the first month of 2013. Not bad!

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

2013-02-01-Estimated_NAV_Announcement.pdf

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Greenlight Re is interesting in theory because it allows one to gain access to Einhorn at slightly better terms.  However, they have a very poor recent track record in underwriting so you'd need to discount the valuation accordingly, depending on whether or not you believe this will continue.  Their combined ratios have exceeded 100% over the past couple of years which is also worse than market.  This mainly stems from a truck line of insurance that they mistakenly underwrote.

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" slightly better terms" ?

I thought the insurance corp still pay his hedge fund the same fee ?

 

Greenlight Re is interesting in theory because it allows one to gain access to Einhorn at slightly better terms.  However, they have a very poor recent track record in underwriting so you'd need to discount the valuation accordingly, depending on whether or not you believe this will continue.  Their combined ratios have exceeded 100% over the past couple of years which is also worse than market.  This mainly stems from a truck line of insurance that they mistakenly underwrote.

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Loeb sold a chunk of Yahoo! on Friday. did you see this great write up on Third Point Offshore? ttp://www.valuewalk.com/2012/06/third-point-offshore-an-alpha-master-at-a-discount/ Has anyone ever checked out Greenlight RE? thoughts?

 

Thank you for posting the link.

Actually, there is a thread on GLRE. So, you can find more information over there!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

 

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The insurance companies indeed pay the standard fees to the hedge funds, however, you get the benefit of intraday liquidity and the benefit of the float. As for Greenlight's bad underwriting, I would not call it history, as it is a very new company and the poor results have been primarily due to one bad business they went into (commercial auto) which I view as a single poor decision. Time will tell.

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  • 1 month later...

February 2013 performance.

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

2013-2-February-Monthly-Report-TPOI.pdf

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  • 5 weeks later...

March 2013 performance.

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

2013-3-March-Monthly-Report-TPOI.pdf

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Mr. Loeb's Q1 2013 Letter.

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

 

Third-Point-Q1-2013-Investor-Letter-TPOI.pdf

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I am not going to spam thank you with every update so here is one thank you, and I appreciate you posting the material, very interesting!

 

You are welcome! I know that activists are looked at with suspicion on the board… so, it is fine to know that at least someone is interested in TPOU! ;)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

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Guest hellsten

http://www.bloomberg.com/news/2013-04-10/third-point-starting-greek-focused-hedge-fund-on-recovery-bet.html

 

Still, Third Point is convinced “more than ever” that Greece will rebound and plans to participate in the recovery through “opportunistic equity investments,” the hedge-fund firm wrote in a Jan. 9 letter to clients.

“The Greek equity market is relatively small, but the nation is starved for capital,” the January letter said.

Among the investments Third Point has considered is Opap SA (OPAP), the state-controlled gambling company that Greece agreed to sell a 33 percent stake in as part of the nation’s bailout. Third Point was among seven companies, including private-equity firms TPG Capital and BC Partners Ltd., that Greece approved in November to participate in the bidding for Opap, which had revenue of 4 billion euros ($5.2 billion) last year.

 

Third Point already invests indirectly in Greek real estate as the biggest shareholder of Dolphin Capital Investors Ltd (DCI)., a developer of holiday resorts that describes itself as one of the largest private owners of seaside land in Greece and Cyprus. The Dolphin stake has surged 67 percent since Third Point made the investment in last year’s fourth quarter, according to yesterday’s letter to clients.

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@giofranchi

 

I just joined this forum and am pleased to find some like minded investors such as yourself. I'm building a core long term portfolio around Third Point Offshore when discount to NAV is >15%. This is in combination with GLRE and Fairfax when their book values trade at lower multiples.

I think TPNTF (I assume you use the euro traded fund) with have a great long term CAGR and we have the added benefit that as a closed end fund it trades at a discount. This is especially beneficial now that in November they proved they are willing to return profits via special dividend to close the discount.

 

Given the fact it initially traded at a premium to NAV when it first traded (as it probably should with Loeb having a superior long term CAGR), I'm wondering what needs to happen within the capital markets to see its discount close. Any thoughts?

 

Add the fact that a market neutral strategy gives great diversification to a long value oriented portfolio, I see little disadvantage to owning this security.

Cheers and thanks in advance for ongoing updates!

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Given the fact it initially traded at a premium to NAV when it first traded (as it probably should with Loeb having a superior long term CAGR), I'm wondering what needs to happen within the capital markets to see its discount close. Any thoughts?

 

Don’t ask me! It befuddles me as well!!  ::)

 

And welcome to the board!  :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

 

 

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  • 2 weeks later...

hi gio-

 

thanks for the attachment. appreciate your posts.  not sure if you're in america, but wondering which broker you'd recommend for investing in third point offshore?  as of now, i can't even trade anything other than adr's with my broker.  also, are there any tax considerations or fee considerations for those investing outside of england?  thanks much in advance!

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hi gio-

 

thanks for the attachment. appreciate your posts.  not sure if you're in america, but wondering which broker you'd recommend for investing in third point offshore?  as of now, i can't even trade anything other than adr's with my broker.  also, are there any tax considerations or fee considerations for those investing outside of england?  thanks much in advance!

 

Hi luck,

no, I am from Milan, Italy. And I invested in TPOU through my firm’s bank account (Intesa San Paolo SpA). I am not aware of any peculiar tax consideration for those outside England on capital appreciation. Though, I must say that at the end of 2012 TPOU distributed a very generous special dividend over which my firm was taxed 20%, instead of 15%, the norm in Italy for foreign dividends. Besides, tax considerations for a firm and for an individual might differ a lot. Sorry, I cannot be of much help…

 

giofranchi

 

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Hi Gio

 

I'm curious if you participated in the reverse tender offer at the end of the year?

I personally would prefer them to close the NAV primarily with regular share buybacks or by continuing the special dividends.

When reviewing the year end statements I noticed the euro/sterling total shares is a much smaller volume than the USD. Have you found the euro trading has big bid/ask spreads?

 

Cheers

 

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Hi Gio

 

I'm curious if you participated in the reverse tender offer at the end of the year?

I personally would prefer them to close the NAV primarily with regular share buybacks or by continuing the special dividends.

When reviewing the year end statements I noticed the euro/sterling total shares is a much smaller volume than the USD. Have you found the euro trading has big bid/ask spreads?

 

Cheers

 

Hi tripleoptician,

no, I didn’t. And my firm is invested in TPOU, not in TPOE. Though they declared they will go on paying a special dividend equivalent to 4-5% of NAV, I would rather see them interrupt this policy and buy back a lot more shares. I don’t see the point of paying large dividends, when they are clearly very much tax inefficient… Anyway, as long as Mr. Loeb goes on doing a great job, I will certainly not sell because of tax matters.  :)

 

giofranchi

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