Billionaire investor Dan Loeb flags the intense fear and worry in markets - and touts the bargains emerging from the turmoil
- Billionaire investor Dan Loeb underscored the deeply pessimistic mood in financial markets today.
- He welcomed the bargains emerging as investors stress about inflation and recession.
Dan Loeb has flagged the intense fear and anxiety pervading financial markets today, and touted the cut-price assets emerging as a result.
The billionaire investor and Third Point chief noted in his third-quarter letter to clients, published Tuesday, that the market mood has soured since the summer.
Loeb complained that Britain's fiscal fiasco — which tanked the pound, caused bond yields to spike, and roiled the pensions industry — had "introduced a new narrative of concern around 'financial stability' that magnified an already gloomy scenario."
The hedge fund manager noted that many leading financial pundits have "joined the negative chorus of perma-bear Nouriel Roubini with declarations that we are entering a severe recession and prolonged bear market."
Moreover, he highlighted a dour mood at recent industry events, where attendees weighed up the risk of another financial crisis and competed to make the lowest prediction for the S&P 500's bottom. However, that hasn't stopped him from pouncing on the deals materializing from the malaise.
"I am sympathetic to many of these economic and geopolitical concerns but, amidst all the gloom, we are seeing very attractive valuations, particularly assuming an economic scenario short of financial Armageddon, and are taking up exposures as we speak," Loeb said.
He gave the example of Third Point's new stake in Colgate-Palmolive. Loeb and his team pounced on the consumer-products giant because they determined it was undervalued, liked the pricing power of its strong brands, and anticipated people would keep buying items like soap and toothpaste even during a recession.
Loeb also said he's seeing the most enticing opportunities in the structured-credit market since the height of the pandemic in 2020, as the Federal Reserve's interest-rate hikes continue to foster unease and price volatility.
The activist investor emphasized that he's keeping an eye on the plethora of market risks, but remains focused on buying into "world-class companies at bargain basement prices" and capitalizing on event-driven situations such as acquisitions or spin-offs.
Even if the economic backdrop worsens and a severe recession sets in, Third Point has shorts and hedges in place to mitigate those headwinds, Loeb said. He added that allows it to make the most of the deals and discounts that emerge.