Loeb Embraces Trump ‘Paradigm Shift,’ Says Stocks Not Overvalued

  • Hedge fund manager sees ‘plenty of good valuation situations’
  • Loeb expects corporate activity to increase in Trump era

Daniel Loeb at the World Economic Forum (WEF) in Davos, Switzerland, on Jan. 22, 2016.

Photographer: Simon Dawson/Bloomberg

Hedge fund manager Dan Loeb, seeking to recover from years of underperforming the S&P 500 Index, said he’s optimistic about his approach in the Donald Trump era, as many stocks still have room to advance after the post-election rally.

“I’m not sure that -- given the increase in S&P earnings that we expect due to changes in policy as well as tax reform -- that it’s as overvalued as people think,” Loeb said Friday in a conference call discussing results at Third Point Reinsurance Ltd., the Bermuda-based company where he oversees investments. “We’re seeing plenty of good valuation situations.”

Loeb added to bets on financial and industrial companies after Trump’s victory in November, while reducing holdings the technology, media and telecommunications group. He said there are also opportunities where valuations are attractive for companies seeking to reshape themselves through mergers, acquisitions or spinoffs.

“The complexity is obscuring the earnings power of the company or companies that are going through a financial or operational restructuring,” he said. “We’re not really fazed by that.”

Stocks have been climbing for years, extending gains after Election Day. Still Loeb’s offshore fund trailed the S&P 500, including reinvested dividends, every year from 2013 to 2016. Kai Pan, an analyst at Morgan Stanley, asked Loeb on the call why he feels optimistic.

‘We Typically Thrive’

“What gives me confidence about the future is I just think we’ve had a paradigm shift with the new administration in terms of having a backdrop that is supportive of business and pro-growth,” he said. “There will also be an increase -- we’re already seeing it -- in corporate activity, which is something where we typically thrive.”

Third Point Re slipped 5 cents to $12.10 at 9:38 a.m. in New York. The company posted a fourth-quarter loss of $46.7 million late Thursday and said that Chief Executive Officer John Berger is stepping down, to be replaced by Chief Operating Officer Rob Bredahl.

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