As he looks for overlooked opportunities outside the tech giants known as the Magnificent Seven, Third Point's Dan Loeb said he is also attracted to companies outside the frenetic digital world. “We believe many 'real world' investments are equally attractive,” Loeb wrote in a new investor letter dated Friday. “In markets increasingly disrupted by technology, we focus on finding companies that are less likely to be disrupted due to competitive advantages, integrated industry structures, unique products, or capital intensity that precludes competitive investment.” The popular hedge fund manager cited aggregates, nuclear power, life science tools, specialty alloy makers and commercial aerospace manufacturers as examples. In his letter, Loeb did not name individual stocks related to this investment trend, but his holdings include some that are. His fund has invested more than $380 million in Vistra, an Irving, Texas-based retail electric and power generation company, and $187 million in Ferguson, the largest U.S. distributor of plumbing materials such as pipes, valves and fittings. He also has a small stake in Dublin-based building materials company CRH. VST YTD Mountain Vistra shares YTD “In a market where the 'Magnificent Seven' dominates the narrative, it's understandable that these companies don't get much attention, but that gives you all the more reason to add them to your portfolio when you find them,” he added. The Magnificent Seven, which includes Amazon, Microsoft, Meta, Alphabet, Apple, Nvidia and Tesla, have been driving the current bull market and the 2024 upswing. The group has recently experienced a pullback as investors turned to other parts of the market. Loeb said he sees strength in materials, industrials and other sectors, and that his portfolio is well-positioned to take advantage of these trends in undervalued stocks. Third Point's hedge fund returned 1.8% in the second quarter and had a gain of 13.1% for 2024 as of June 30. That trailed the S&P 500's 14.5% return for the same period.
