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Third Point Investors wraps up poor year

TPOU

Third Point Investors Limited (TPOU) announced its annual results for the year ended December 2022. The company returned -24.4% on a NAV total return basis and -25.5% on a share price basis. This compares with a -17.7% return for the MSCI World Index and a -18.1% return for the S&P 500 Index. Despite the poor performance, shares have recovered somewhat with the discount improving over the last few weeks to close at around 14%.

The company was aggressive in buying back shares throughout the year to the tune of $53 million, which was accretive to NAV by 27 cents per share. Other operational highlights for the year included:

  • The appointment of two new independent directors, Richard Boleat and Vivien Gould, in March 2022.
  • The implementation of an exchange offer for shares in the company during the year into the Third Point Master Fund at a discount of 2% to NAV. The offer was fully subscribed at the limit of $75 million.
  • The allocation of a further $50 million towards its buyback programme for the period to September 2023.

Rupert Dorey, chair of the company, commented:

“While 2022 was extremely disappointing from a performance perspective, the investment manager is encouraged that the opportunity set currently presented is highly attractive for capitalising on its many strategies employed, including security selection and specialist credit.

“It is notable that the investment manager’s longevity and ability to bounce back strongly after significant drawdowns is a defining characteristic, and we believe that the current investment landscape will offer the opportunity to earn strong returns in the years ahead.”

Regarding the outlook, he continued:

“This continued push and pull between monetary policy and the real economy will likely yield uneven results in the near term. However, the investment manager’s earnings outlook for 2024 is more favourable, and it believes conditions are now ripe for many types of event driven and activist investing. The stock market decline has created attractive valuations for many high quality companies, while Covid created aberrations in growth and a reluctance to let go of underperforming business units or bloated cost structures. To the extent companies have not addressed these issues themselves or have been slow to react, engaged shareholders have an opportunity to encourage more efficient operations and capital allocation. This opportunity is the driving force behind the increasing exposure to activism and event-driven names in the Third Point portfolio. The firm used market weakness in Q4 2022 to bring up its exposures, initiate several new positions, and add to others that traded to attractive levels. In addition to activism, the Investment Manager is focusing on companies making significant share repurchases, planning to unlock value via a spin-off, or improving a muddied narrative after being born out of bankruptcy.

“Third Point’s credit portfolio remains positioned based on the fundamental view that the consumer was (and remains) in good shape. The huge increase in housing prices over the last few years combined with mortgage amortization provides significant credit support to the residential mortgage market. By contrast, corporate debt levels are high. As a result, the investment manager’s structured credit exposure is at a relatively high level while its corporate exposure is much lower. Third Point has continued to hedge most of the interest rate risk in both credit portfolios.”

TPOU : Third Point Investors wraps up poor year

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