Dan Loeb's hedge fund is up 10.7% for the first half of this year, according to a client letter dated July 26.
Dan Loeb's Third Point hedge fund is betting big on BlackRock, the world's largest asset manager.
In a client letter dated July 26 explaining its stock investment, Third Point said: "We think BlackRock is a misunderstood franchise that is just beginning to inflect."
Here's an excerpt from the letter (emphasis added):
"We see BlackRock
as far more than an asset manager dependent on market movements. It is increasingly becoming a network or index-like business, with earnings power driven by ETFs (via iShares) and data & analytic services (via Aladdin). These are oligopoly businesses with faster growth and much higher incremental margins than traditional asset management – and thus deserve much higher P/E multiples over time. With shares at less than 15x our 2019 EPS forecast, and an outlook for consistent mid-teens EPS growth, we think BlackRock is a misunderstood franchise that is just beginning to inflect."
"...In the US, iShares had more inflows in 1H17 than the next 10 competitors combined...We think this acceleration in ETFs is just getting started, as regulatory change globally pushes lower-cost, transparent investment products, and institutional investors use ETFs as investment solutions, particularly in fixed income – an area where BlackRock has an even higher global market share for ETF products (~50%)."
That point on ETFs was echoed by BlackRock's CEO Larry Fink earlier this month, Business Insider previously reported. BlackRock has $5.7 trillion in assets.
"Index and ETFs still only represent 10% of the entire equity market global capitalization," Fink said July 17 on his firm's second quarterly call. "With $160-odd trillion global equity market capitalization, we have much more opportunities for ETFs to grow, not just on equities, but in fixed income. And I believe this is just the beginning."
Third Point is up 10.7% for the first half of this year, according to the firm's client letter. That compares to a 9.3% gain in the S&P 500 over the same period.
Third Point's offshore fund gained 4.6% in the second quarter compared to a 3.1% gain in the S&P 500, the letter said.
Here are some more excerpts from Third Point's letter: