Hedge fund Third Point LLC said it added new positions and bulked up on names it already owned when markets sold off earlier this year and said that Amazon is at an "inflection point" that should lead to a higher share price.
The New York-based firm, whose investments are closely watched by rivals, also said certain technology stocks often referred to as "old" tech like Intel "deserve a second look."
Third Point, which oversees roughly $18 billion, has invested in Intel and Amazon for some time but said it had "significantly increased" the size of its investment in Amazon recently, betting new management will move the company forward with new initiatives.
Third Point's founder, billionaire investor Daniel Loeb, wrote about the moves in a letter sent to shareholders on Wednesday evening and reviewed by Reuters.
The outlook for Amazon, valued at $1.6 trillion, was described in the letter as especially bright, as Loeb expects some of the excess costs associated with the coronavirus pandemic, including labor shortages and supply chain disruptions, to disappear as the environment normalizes.
He wrote that he was happy to see Amazon's board buy back shares in January for the first time in a decade, and expects that Amazon may start returning more capital to shareholders.
Loeb also applauded the company's decision to break out advertising revenue and detail capital expenditures by category, calling the steps "shareholder-friendly moves" as the company's new CEO, Andy Jassy, makes his mark.
The letter called it rare for investors to get to buy a company like Amazon at a 30% to 40% discount to what it should be worth before an expected uptick in growth that should give Amazon "an almost unlimited runway of potential to compound in value."
Amazon's stock price surged during the pandemic in 2020 as people avoided shopping in stores, but grew less forcefully last year, laying the groundwork for Third Point to add to its position.
On a call with investors held earlier in the day, Loeb said the market is not fully recognizing the value of Amazon's two businesses; the e-commerce business and its Amazon Web Services cloud business, a person familiar with the content of the call said.
Third Point also invested in IT services company Accenture and is betting that its market share gains will "sustainably accelerate" amid growing demand for IT services and shifts to digital transformation.
Loeb also praised Intel's new CEO, Pat Gelsinger, who was appointed early last year after Third Point pushed for changes and said the company appears to have "turned the corner" with talent coming back, and improving product suite, and a willingness to invest for growth.
Last year the firm reported a 22.7% gain in the Third Point Offshore fund, even though the fund lost 5.2% during the last quarter. Electric vehicle maker Rivian Automotive, which listed shares last year, was a big winner during the last quarter and Third Point expanded its holdings when the share price dipped below the $78 IPO price. (Source)
