Loeb Sees ‘Attractive Valuations’

May 2 2014 | 2:11pm ET

April has turned to May, but Third Point’s Daniel Loeb is in no mood to sell and go away.

Loeb told his investors that he’d be ignoring the old market maxim this year, noting that the recent pullback in stock prices had made equities attractive.

The activist said that he was too optimistic earlier this year, with some sectors “clearly exhibiting bubblelicious valuations.” But prices have come back down to “attractive levels,” although it isn’t exactly shooting fish in a barrel.

“Four months into 2014, it now seems evident that investment performance will require a combination of good stock selection, patience and deft trading,” Loeb wrote.

Loeb’s performance in the first quarter was not bad, in spite of his premature enthusiasm. Third Point’s flagship returned 3.5% on the quarter, with Dow Chemical Co. among its best performers. But that hasn’t inclined Loeb any more kindly towards the company, which he says should spin-off its petrochemical business.

Dow rejected that proposal in February, but Loeb is undeterred: “Management needs to focus on what is driving this underperformance and how to cure it,” he wrote. “Dow’s integrated strategy does not maximize profits.”

But Loeb was also unusually generous towards a company that has spurned him, saying that Dow’s “level of shareholder engagement has also risen notably, demonstrating an admirable and strong commitment to addressing long-standing concerns.”


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