Billionaire Dan Loeb sold Amazon and Microsoft but bought these ‘Magnificent Seven’ stocks

Dan Loeb is known as an influencer and influencer in the investment world. He founded Third Point, a New York-based hedge fund, in 1995. The company currently has approximately $11.5 billion in assets under management. Rob’s net worth is $3.3 billion. forbes.

The activist investor saw some changes to his hedge fund portfolio in the fourth quarter of 2023. Loeb reduced his stake. Amazon (AMZN -1.54%) and microsoft (MSFT -1.41%). But the billionaire investor bought another ‘Magnificent Seven’ stock.

taking advantage

Loeb sold 210,000 shares of Microsoft stock in the fourth quarter. Although this reduced Third Point’s stake in the tech giant by more than 9.4%, Microsoft still remains the second-largest holding in the hedge fund’s portfolio.

The billionaire investor has owned Microsoft continuously since 2006. He will begin his new position in the fourth quarter of 2022, aligning with the generative AI wave that most recently began with the launch of OpenAI’s ChatGPT. Microsoft has been a major beneficiary of this trend thanks to its partnership with OpenAI.

Third Point first took ownership of Amazon in late 2019 and held the stock until the second quarter of 2022. Loeb didn’t stay on the sidelines for long with the e-commerce and cloud services leader. He started his new position at Amazon in the second quarter of 2023. Despite reducing Third Point’s stake in the stock by nearly 10.3% in the fourth quarter of 2023, Amazon still ranks as the hedge fund’s third-largest holding.

Why did Loeb reduce his positions at Amazon and Microsoft? The most likely reason is that he wanted to make some profit. Both stocks have posted impressive gains over the past year.

Bigger bets on the meta

Loeb cooled off a bit on the two Magnificent Seven stocks, but he made bigger bets. meta platform (meta -2.15%). The hedge fund manager increased its stake in Third Point’s Meta by nearly 5.5% in the fourth quarter of 2023. The position was valued at $410.6 million, making 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 shares. He owned stock in the social media company for a little over two years before leaving that position. The activist investor bought Meta stock again in the second quarter of 2020 and maintained the position until the fourth quarter of 2021. Loeb went back to the well with another new stake in Meta in the third quarter of 2023.

Like Amazon and Microsoft, Meta has enjoyed a generative AI tailwind over the past year. But I don’t think this was the main reason Loeb added his position in the stock. Instead, my hunch is that Loeb liked Meta’s moves to increase profitability.

Those efforts are paying off. Meta’s revenue more than tripled in the fourth quarter of 2023 compared to the previous year. Annual profits increased 69%.

Did Loeb take the right steps?

In a sense, Loeb went 3-for-1 with the Magnificent Seven deal. Loeb’s decision to increase Third Point’s stake in Meta is already paying off. Meta stock has surged more than 45% since the end of 2023. However, Amazon and Microsoft are also up by double-digit percentages year to date. Loeb could have made more money by holding stock in both companies.

But cutting positions at Amazon and Microsoft may still be the right call for Loeb. Both stocks make up a significant portion of Third Point’s portfolio. You can’t blame investors for trying to make sure their holdings aren’t too concentrated in a few stocks.

Over the long term, we think Loeb and other investors will do well by owning all three stocks. Amazon and Microsoft’s cloud businesses will continue to grow robustly, largely thanks to AI. I like Meta’s focus on business messaging and smart glasses with built-in AI assistants. I expect Amazon, Microsoft, and Meta to remain great for a long time to come.