Dan Loeb is known in the investment world as a mover and shaker. He founded the New York-based hedge fund Third Point in 1995. He now manages assets of around $11.5 billion. Loeb’s net worth is reported to be $3.3 billion Forbes.
The activist investor moved and shook his hedge fund’s portfolio in the fourth quarter of 2023. Loeb reduced his shares Amazon (NASDAQ:AMZN) And Microsoft (NASDAQ:MSFT). However, the billionaire investor bought another share of the “Magnificent Seven”.
Take profits
Loeb sold 210,000 shares of Microsoft stock in the fourth quarter. While this reduced Third Point’s stake in the tech giant by over 9.4%, Microsoft remains the second-largest holding in the hedge fund’s portfolio.
The billionaire investor has owned Microsoft off and on since 2006. He most recently opened a new position in the fourth quarter of 2022, just in time to ride the generative AI wave sparked by OpenAI’s launch of ChatGPT. Thanks to its partnership with OpenAI, Microsoft has been one of the main beneficiaries of this wave.
Third Point first owned Amazon in late 2019 and held the shares until the second quarter of 2022. Loeb didn’t stay on the sidelines for long at the leading e-commerce and cloud services provider. He opened a new position at Amazon in the second quarter of 2023. Although he reduced Third Point’s stake in the stock by nearly 10.3% in the fourth quarter of 2023, Amazon is still the hedge fund’s third-largest holding.
Why did Loeb reduce his positions in Amazon and Microsoft? The most likely reason is that he wanted to take profits. Both stocks delivered impressive gains last year.
A bigger bet on meta
Although Loeb cooled off a bit on two Magnificent Seven stocks, he made a bigger bet Metaplatforms (NASDAQ:META). The hedge fund manager increased Third Point’s stake in Meta by nearly 5.5% in the fourth quarter of 2023. The position’s $410.6 million value made Meta Third Point’s sixth-largest holding at the end of 2023.
Loeb’s history with Meta dates back to the second quarter of 2016, when he first purchased the stock. He owned shares in the social media company for just over two years before exiting the position. The activist investor bought Meta shares again in the second quarter of 2020 and maintained this position until the fourth quarter of 2021. Loeb returned to the stock market in the third quarter of 2023 with another new stake in Meta.
Like Amazon and Microsoft, Meta enjoyed tailwinds from generative AI last year. However, I suspect that this was not the main reason for Loeb to increase his position in the stock. Instead, I’m assuming Loeb liked Meta’s moves to increase profitability.
These efforts are paying off. Meta’s profit more than tripled year-over-year in the fourth quarter of 2023. Full-year profit rose 69%.
Did Loeb take the right steps?
In some ways, Loeb went one for three with these Magnificent Seven transactions. Loeb’s decision to increase Third Point’s share of the meta is already paying off. Meta stock is up over 45% since the end of 2023. But Amazon and Microsoft have also increased by double-digit percentages since the beginning of the year. Loeb could have made more money if he had held onto his shares in both companies.
However, reducing positions at Amazon and Microsoft could still have been the right decision for Loeb. Both stocks make up a significant portion of Third Point’s portfolio. You can’t blame any investor for wanting to make sure their holdings aren’t too concentrated in a handful of stocks.
In the long term, I think Loeb – and other investors – will be well served by owning all three of these stocks. Amazon and Microsoft’s cloud businesses are expected to continue to grow strongly, primarily thanks to AI. I like Meta’s focus on business messaging and smart glasses with embedded AI assistants. I expect Amazon, Microsoft and Meta to remain great for a long time.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Keith Speights has positions at Amazon, Meta Platforms and Microsoft. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
Billionaire Dan Loeb sold Amazon and Microsoft but bought this “Magnificent Seven” stock originally reported by The Motley Fool