Third Point Up 3.3% In Q2, Criticizes Sony, CF Industries

Jul 30 2013 | 12:51pm ET

Third Point launched a new activist campaign against a fertilizer company and sharpened its criticism of Sony Corp. as the hedge fund told clients it had gained 3.3% in the second quarter.

New York-based Third Point credited its U.S. and Japanese stock holdings for the return, noting that it "began to sell them near their highs in May and early June before the market began to correct sharply."

The letter dealt mostly with Sony and Third Point's new position in CF Industries Holdings. Third Point blasted Sony's entertainment division—he has called for a partial spin-off of the unit—saying it "remains poorly managed, with a famously bloated corporate structure, generous perk packages, high salaries for underperforming senior executives, and marketing budgets that do not seem to be in line with any sense of return on capital invested."

"Keeping entertainment underexposed, undervalued and underperforming is not a strategy for success," Third Point wrote. "Given entertainment's perpetual underperformance, perhaps Sony's reluctance to discuss it candidly stems from (understandable) embarrassment."

Third Point also said it had bought into CF, the largest producer of nitrogen fertilizer in the U.S., calling on the company to pay a larger dividend to erase the "unwarranted discount" in its stock price.

"We believe its structural cash flow generation strength is misunderstood and that management should deliver a much larger dividend," the hedge fund said. "Such a dividend would highlight the sustainability of its cash flow generation and lead to a substantial re-rating."

Third Point also touched on its sale of its gold holdings early in the third quarter and its investment in Yahoo!


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