Third Point on Nestle
Third Point first took a position in Nestlé (NSRGY) during the second quarter of 2017. The letter stated that Nestlé had become complacent after years of success, but the company has now repositioned for long-term success. Over the last 18 months, Third Point has been encouraged by the progress the company has made. It believes that “2018 was a pivotal year for Nestlé, one that not only returned the business to double-digit EPS growth but also laid the foundation for similarly strong performance over the next two years.” The fund now expects this momentum to continue for Nestlé beyond 2020.
In regard to United Technologies (UTX), Third Point mentioned that it is happy that United’s board decided to split the company into three separate focused companies. Third Point had approached UTX’s board expressing its concerns regarding the company’s weak performance. Third Point had even suggested breaking up the company into three separate focused businesses. While initially UTC’s chair and CEO, Gregory Hayes, was hesitant to break up the company three ways due to high costs, he finally announced the split in November 2018.
Closing UTX’s valuation gap versus peers
Third Point, however, still believes that despite the separation announcement, UTX’s sum-of-parts discount is widening and the valuation gap versus its closest peer, Honeywell International (HON), has reached a ten-year high. The fund believes that the separation will highlight these discrepancies.
You can also read, Dan Loeb’s Third Point Had a Weak 2018: Will 2019 Be Any Better? for a detailed analysis of the funds’ new positions, exits, and stake increases.