MarketFolly: Given that Loeb and Third Point often focus on event driven and arbitrage plays, it’s interesting to see them currently have close to no risk arbitrage positions. They had previously had in excess of 20% of their capital invested in these strategies. This is mostly due to the fact that the Pfizer/Wyeth and Merck/Schering mergers closed, two arbitrage situations that hedge funds were playing heavily.
Loeb’s investment outlook for the next six to twelve months is ‘favourable’ in both the equity and debt markets. He thinks that interest rates will remain low as the government continues to fight unemployment and get us on the road to recovery. On a corporate level, he expects to see “anemic revenue growth but continued margin expansion, increased corporate restructuring activity (spin-offs, mergers, and the like), and earnings that will frequently surprise to the upside. Thus, for equity investors, it is a stock picker’s market on both the long and short sides.” To see what equity positions Third Point is currently investing in, we recently checked out their portfolio.
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