Davis Funds 2017 Annual Investor Letter


•  In 2016, Davis New York Venture Fund returned 12.25% versus 11.96% for the S&P 500 Index.¹

•  Over the most recent one, three and five year periods, a $10,000 investment grew to $11,225, $12,316 and $18,681, respectively.¹

•  $1.97 million versus $932,077 is the value of a $10,000 investment in the Fund since inception versus the value of a $10,000 investment in the S&P 500 Index.1

•  Opportunities in today’s market include global leaders selling at bargain prices, dominant lesser-known businesses in necessary economic niches, blue chips of tomorrow and beneficiaries of short-term misperceptions.

•  Risks in today’s market include overvalued dividend darlings and companies with near peak profit margins.

Results of Our Investment Discipline

Davis New York Venture Fund returned 12.25% versus 11.96% for the S&P 500 Index in 2016.2

Davis New York Venture Fund continued its long record of building shareholder wealth. As shown in the chart below, the value of an initial $10,000 investment has increased in all periods shown.

On a relative basis, our results beat the market in 2016 as they have over the long term. Compounded over the long run, our advantage over the index has created enormous value for shareholders.

Just consider that an initial $10,000 invested in Davis New York Venture Fund at our inception would now be worth more than $1.9 million, more than twice as much as an equivalent investment in the S&P 500 Index.

While our disciplined investment approach has not always been rewarded by the market over shorter periods, this active management approach has created wealth for our shareholders in the long run. By standing apart from the crowd, keeping expenses low, investing alongside our shareholders, and ignoring short-term fads, we have built wealth for shareholders and beaten the index since 1969. •

Investment Outlook

Equities should outperform bonds for the next decade.3 Avoid overpriced dividend darlings. Focus on the important and knowable.

The last five years have been filled with the unexpected. Time and again professional forecasters and pundits have been proven wrong: from the rise of ISIS to the collapse in energy prices; from Facebook’s poorly received initial public offering to the bankruptcy of Detroit; from Brexit to the election of Donald Trump. Yet through it all, Davis New York Venture Fund has grown the value of a dollar invested in that time period by more than 80%, showing that while short-term predictions may be worthless, long-term preparation is invaluable.4

The essence of our preparation is a relentless focus on what is both knowable and important. For example, while the short-term outlook for bond markets may not be predictable, we know today’s historically low interest rates leave bondholders with less upside potential and more downside potential than at any other time in modern history. With the yield on long- term government bonds now comparable to the dividend yield on stocks, we expect stocks to outperform bonds handily in the decades ahead.

Another fact that is both knowable and important is market dips are inevitable. For example, since 1928 the market has experienced a 10% dip about every eight months and a 20% dip every two and a half years on average. Yet, when we experience such a dip, the media act as if the world is coming to an end. As a result, many investors panic and sell at low prices creating a buying opportunity for those who can keep their heads. Since stocks are one of the best ways to build long-term wealth, the years ahead are likely to reward those investors who have a long-term perspective, flexibility and steady nerves and to penalize those investors who are frozen by indecision, committed to passive investment strategies or likely to panic during market downturns.

A final important and knowable fact is investors often feel safest when risks are greatest. From internet mania to the housing boom, what looked like a sure thing in the rear view mirror ended up a speculative bubble. Two sectors where investors feel safe today have risen to levels that appear risky to us. First, many popular dividend-paying stocks, often referred to as dividend darlings, have been bid up to premium valuations that could spell trouble for investors who assume dividends are guaranteed. Second, with regulatory encouragement, roughly a trillion dollars has been switched from actively managed funds into passive index funds since 2007. Such huge fund flows create momentum, as more money is automatically invested in those stocks whose prices have already gone up. Unfortunately, momentum-based strategies lead to bubbles and bubbles eventually burst. Moreover, while passive investing may have beaten the average manager, a select few active managers, including Davis Advisors, have beaten the market over the long term. In fact, in addition to Davis New York Venture Fund, all five of the equity strategies managed by our firm, including Davis Global Fund, Davis Opportunity Fund, Davis International Fund, and Davis Financial Fund, have outperformed their peers since their inception.5 Happily, as more money flows into passive index strategies that employ no securities analysis, more investment opportunities are available for investors like us who do. After all, finding undervalued companies is far easier when fewer investors are looking. •

The Portfolio

Global leaders trading at bargain prices. Dominant lesser-known businesses. Blue chips of tomorrow. Beneficiaries of short-term misperceptions.6

Four portfolio themes have allowed us to create a powerful combination of growth and value in Davis New York Venture Fund:

Global Leaders Trading at Bargain Prices—Some of the strongest and best-known companies in the world make up the largest portion of the Portfolio. This fact is nothing new. What is unusual though is short-term economic concerns over the past year have reduced the share prices of a handful of global leaders such as Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), United Technologies (NYSE:UTI), American Express (NYSE:AXP), and Monsanto (NYSE:MON) to bargain levels at a time of high valuations for the average company.7 Buying top tier businesses at bargain prices is a value investor’s dream.

Dominant Lesser-Known Businesses— Davis New York Venture Fund also invests in a group of lesser-known businesses that dominate dull but necessary niches in the global economy. Whether they participate in unglamorous industries or are headquartered in different countries, these businesses are not household names to U.S. investors. As a result, their shares often trade at a discount to better-known companies despite having the same qualities of market dominance and durability as the global leaders described above. Such companies include Johnson Control’s leadership in fire and security, building controls, and car batteries; Liberty Global’s strength in European cable TV and broadband; LafargeHolcim’s dominance of the world cement industry, and Safran’s leadership in jet engines (the company has been an equal but less well-known partner of General Electric for more than 30 years). These companies combine the relevance and resilience of blue chip companies with below-average valuations.

Blue Chips of Tomorrow—Another theme is fast-moving companies that use innovation to disrupt the economics of larger but less agile competitors. Similar to evolution, capitalism is a process of constant change that rewards businesses that can adapt. Over the decades, we have seen many examples of today’s disrupters emerging as tomorrow’s blue chips. Several of Davis New York Venture Fund’s core holdings reflect this dynamic. Amazon (NASDAQ:AMZN) has not only revolutionized the retail business, but also the information and technology industry through Amazon Web Services (AWS). Alphabet (NASDAQ:GOOGL) (the parent company of Google) began by making the world’s information accessible through the internet and emerged as the largest and most profitable advertising firm in the world, the brains behind the vast majority of all smart phones, a leader in internet video, and the emerging leader in artificial intelligence and self-driving cars.

CarMax (CMX) is another example of an innovator that has been just as disruptive in the auto sector, bringing trust, choice and quality to the murky but enormous used car industry. Investors in disruptive leaders stand to benefit not just from the growth in these companies’ underlying businesses, but also from their gradual inclusion in the ranks of blue chip stocks.

Beneficiaries of Short-Term Misperceptions— Short-sighted investors avoid companies that face short-term misperceptions, creating an opportunity for long-term investors willing to look beyond today’s headlines. In banking, for example, memories of the financial crisis of 2008–2009 combined with subsequent anti-banking rhetoric and media coverage have blinded investors to the fact carefully selected banks are both cheap and safe, in our opinion. Contrary to perception, many top tier banks are not only reporting record earnings but are also far better capitalized than at any time in the last 50 years. While unloved now, we believe the leading financial companies we own will be big contributors to Davis New York Venture Fund’s future returns as the reality of their strong economic fundamentals and rising dividends eclipses current investor perceptions.

Similarly, over the past year, investors fled the energy sector in response to the dramatic (and unsustainable) collapse in oil prices. While oil prices are unknowable in the short term, they must exceed the cost of replacing reserves over time. This simple fact will eventually lead to higher energy prices and should drive future returns for the well-positioned, low-cost producers the Fund holds. As a result, we repositioned the energy portion of the Portfolio, adding to existing holdings and initiating new investments. We own a select group of innovative and well-positioned energy companies with the capital allocation discipline, management experience and low-cost, long-lived reserves that will allow them to increase production for decades to come. Our holdings include Occidental Petroleum, Apache, Cabot Oil & Gas, and Encana.

All in all, the carefully selected companies that make up Davis New York Venture Fund combine above-average resiliency and growth with below-average prices. •


Today, as always, when confronted with background noise, investors benefit from tuning out the static of short-term market predictions and company forecasts and focusing instead on the long-term opportunities and risks. Today, we see significant opportunity in areas of the markets that are over­ looked and risk in popular areas of the market where investors feel safest. This combination creates opportunity for those who can be flexible and independent. At a time when pundits and commentators are making the case that experience and judgment do not matter and that the best investors can hope for is an average result, we strongly disagree. We believe a carefully selected Portfolio of durable, well-managed businesses with competitive advantages, selling at a discount to true value and overseen by a seasoned team with proven results will lead to a better-than-average outcome. In investing, as in any other profession, skill matters. For more than 47 years, we have demonstrated the value of that skill by building wealth for our shareholders and generating results that have exceeded the market averages. With the vast majority of our net worth invested alongside our shareholders, we have every incentive and intention to build on this record in the years and decades ahead.


Seth Klarman: Raising The Warning Flag On Index Fund Valuations


I normally spend my winters in a very cold part of the world. This year I decided that I was not going to suffer through another miserable three months where every trip out to my car requires mental preparation for cold shock you are about to receive.

I packed up the entire family and we headed to Hawaii for an extended stay.

The first time we went to a beach (Big Beach in Makena, Maui) there was a sign posted that warned of unusually strong current and advised against swimming.

Yet, despite the warning there were dozens of tourists in the water.

Seeing so many people swimming, my kids became rather annoyed when I told them that they would not be going into the ocean on that day.

My explanation for why was simple.

The signs were posted by lifeguards who are at that beach every day and know exactly how risky the current conditions were. We (and most of the people who actually were in the water) on the other hand had never been to the beach before and didn’t know the risks.

For me it was an easy decision to trust the experts. The downside of keeping my kids out of the water was that they were annoyed with me for a few hours. The upside was that I made sure they didn’t put their lives on the line for the sake of a swim.

When in doubt listen to the proven, experienced voices. That advice applies to swimming in Maui – it also applies to investing the stock market today.

A Baywatch Quality Lifeguard Is Telling Investors That Now Is Not A Time For Swimming

Imagine the S&P 500 (NYSEARCA:SPY) is the beach and retail investors are all tourist swimmers. Today we have the ultimate lifeguard on duty at out beach.

Think David Hasslehoff in his prime on Baywatch.

This lifeguard doesn’t wear an orange bathing suit and carry a life-saving flotation device. He wears some khaki pants and carries a constant focus on risk aversion. Hasslehoff (at least his Baywatch character) may have been good at his craft, but our investment lifeguard is a lot better.

Our lifeguard’s name is Seth Klarman and he manages a hedge fund called Baupost Group. I’m going to tell you about his long investment track record which I hope will convince you that he is worth listening to.

Then I’m going to tell you what he is saying today which are words that I think we as investors need to take seriously. Doing so could both protect us from losing money and perhaps even find some good investment ideas.

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Tesla – All The Red Flags Are There



-Rule number one in investing is “do not lose money.” Rule number two is “do not forget rule number one.” Tesla puts investors offside those rules.

-There are three very clear red flags that Tesla shareholders need to think very carefully about.

-If you are a Tesla shareholder please read through this with an open mind.

I’m going to ruffle a few feathers with this article. I’m certain of that.

That is why I’d like to make something clear up front, if you are a hardcore Tesla (NASDAQ:TSLA) or Elon Musk fan and shareholder I’d just like for you to read this with an open mind. Especially if you have lot of money invested in Tesla.

If you own shares in any company the most important research for you to expose yourself to is the bearish side of the story. Continually reading bullish material will serve only to reinforce your own opinions and not critically examine your investment.

If you’d like to discuss my views in the comment section I’ll be there. For full disclosure I have no long or short position in Tesla. I am completely unbiased. Reviewing this presentation is what opened my eyes to the risks Tesla shareholders are facing.

Electric Cars – Are Unquestionably A Huge Opportunity

There may be no bigger growth opportunity over the next three decades than the electric car. There is no doubt that 25 years from now there will be many multiples of electric cars on the road than there are today.

Source: Bloomberg

They are a viable transportation option today and with the rate that technology changes I literally can’t imagine how much better electric cars will be 20 years from now.

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Third Point (Dan Loeb) 2016 Year End Investor Letter

February 1, 2017

Fourth Quarter 2016 Investor Letter

Review and Outlook

What people remember about the past is likely to warp their judgment of the future. “We often decide that an outcome is extremely likely or impossible because we are unable to imagine any chain of events that could cause it to occur. The defect is our imagination.”

Michael Lewis. The Undoing Project: A Friendship That Changed Our Minds, citing a paper by Daniel Kahneman and Amos Tversky

2016 Review

When Third Point was founded nearly 22 years ago, we defined ourselves as an event driven fund investing in special situations such as spin-offs, demutualizations, bankruptcies, and risk arbitrage transactions. While we still make these types of investments, the critical events driving market, sector, and individual security performance and valuations are increasingly political and economic in nature. Last year, several events had a profound impact on markets and correctly interpreting them was vital for investors.

Early in 2016, a number of funds crowded into a trade based on the consensus view that Chinese policy makers, facing a trilemma, would be forced to choose only two options among ensuring a stable Renminbi, stressing economic growth, or restructuring vast amounts of impaired private debt. Following the popular conclusion that of these three options, China would allow the devaluation of the currency, many hedge funds shorted the RMB and further pressed this view by positioning their portfolios long defensive names and short materials companies.

It turned out that the Chinese government had another trick up its sleeve, avoiding a trilemma choice by engaging in stealthy policies to gradually implement devaluation while continuing expansionary fiscal policy and kicking debt issues down the road. The result of this “unimaginable” maneuver was violent and swift in markets. While we too had many variations of the short RMB trade on, we avoided most of the ensuing mayhem by covering shorts and dramatically increasing our credit and energy bets. As a result, we more than recovered initial losses and had a solid start to the year.

Brexit was the next “unanticipated” event, despite polling which showed it to be a coin flip. Most investors were caught flat footed, panicked in the aftermath of the vote, and took risk off. Some of those who were actually positioned properly for Brexit misinterpreted the likely consequences of the vote and saw huge two day gains on their shorts evaporate just as quickly when markets rallied back. While we did not anticipate the vote, we responded by using the sell-off as an opportunity to increase our exposure and turned in a good post-Brexit performance.

Finally, the U.S. Presidential election was the most significant event of the year and the most important paradigm shift since the financial crisis. We did not anticipate Trump’s win although his election served to crystalize trends that had been taking place for some time but had been largely ignored. Starting the morning after the election, we took immediate steps to reorganize the portfolio around investments that we believe will benefit from Trump’s stated policy objectives.

Despite being properly positioned for two of the three significant macro turns last year, our overall performance was a disappointing +6.1%. While corporate and sovereign credit outperformed meaningfully, our equity portfolio underperformed primarily due to losses in Allergan and Amgen, weak performance of our technology investments, and lackluster performance in structured credit. We discuss our performance and lessons learned in further detail below.


Trump’s election has accelerated the end of QE. The baton is now passing from the Fed to the Treasury, which will provide fiscal stimulus via comprehensive tax reform and infrastructure spending. We expect a significant reduction of corporate and individual taxes, the elimination of the interest rate deduction, and the removal of the deductibility of state and local income taxes from federal returns.

To stimulate investment, we see an immediate deduction for capital spending and a dramatic pullback in government bureaucracy, red tape, and regulation. Most controversial and complex is the proposal to help pay for these measures with a Border Adjusted Tax (“BAT”). According to its proponents, the BAT would encourage greater investment in the United States and harmonize our tax policies with the Value Added Tax levied by many of our trading partners. Finally, a significant infrastructure plan would also stimulate the economy, create jobs, and increase the labor participation rate, which dropped drastically in the Obama era. The infrastructure plan would be paid for in part by an ~8% tax on repatriated funds held offshore by United States corporations.

In the immediate term, we believe we will see an acceleration of economic growth at home. Electing a President who is seen as pro-business (ignoring his protectionist views on global trade) has awakened animal spirits, already demonstrated by the record spikes in both business and consumer confidence since the election. This economic growth will come at the same time as inflation is starting to inflect upwards and the domestic economy is close to full employment, notwithstanding the low labor force participation rate.

While markets are at highs, accelerating economic growth both in the U.S. and globally means that earnings should also rise for the first time in three years. The combination of higher nominal growth and lower tax rates could cause earnings to rise in the high single digits this year. Some observers highlight the parallels to the 1980s, but drawing too much from that comparison is dangerous because the starting levels are very different. Then, both interest rates and unemployment were high; now, both are low and likely moving higher. Debt as a function of GDP was 30%. It is now 80%. The median age in the U.S. was 30 then, and is now 38. While this does not mean things cannot improve, particularly in 2017-18, creating a virtuous cycle by following a 1980s blueprint is highly unlikely.

The regime shift to fiscal spending will create a very different investing backdrop. Cross-asset class correlations should fall and, even within equities, there will be much greater dispersion of results. This environment is undoubtedly better for active investing – just as active investing was considered to be on its deathbed. Higher rates will create opportunities, reversing the one-way trade in yields that dampened the past few years.

Winners and losers will be impacted by policies created by the Trump administration’s actions and the world’s reactions to them. While the markets have moved since the election, we do not believe that investors have digested how different things will be. Markets will continue to do well if we see the promised lower taxes, massive deregulation, and higher growth and wages. For the new President, it will be tough if the stock market is faring poorly. This is not a simple task. Some aspects of tax reform, namely BAT, have the potential to create some volatility in earnings for large importers of goods into the U.S. In anticipation of the BAT becoming reality, we have added investments in securities that have interest rate sensitivity, domestic supply chains, and are net exporters, as well as domestic businesses that benefit from a much lower tax rate.

We expect to do well this year by applying our approach to investing opportunistically in this brave new market. The move from deflation to inflation is good for our style of investing. A reflationary environment creates favorable conditions for value and event driven investing, risk arbitrage, and activism and so our exposure has increased in equities relative to corporate and structured credit. We expect that credit will be a mini-cycle story like the one we saw last year, where opportunities popped up quickly and only those with the ability to be nimble and move capital quickly generated profits.

While our portfolio is primarily focused on the U.S., an accelerating U.S. economy (which results in global growth accelerating as well) creates the right backdrop for non-U.S. markets to perform and so we will likely have more non-U.S. exposure as 2017 progresses. Our bullishness is not without some caution, however. We recognize that trade wars and/or escalating inflation could result in a policy mistake that could then result in a sharp sell-off. Our hedges are structured to guard against negative impact from those events.

Portfolio Performance and Positioning

Our net return to investors in the flagship fund was 6.1% last year. We generated positive returns in corporate credit via the long energy trade, Argentine sovereign credit investments, risk arbitrage, and our constructive positions in Baxter, Dow, and Sotheby’s. Hedges detracted moderately while structured credit was roughly flat. Our biggest losers were sizeable equity investments in the healthcare sector – particularly Allergan – and shorts.

So, what did we learn that can help us improve? Primarily that our portfolio has suffered over the past few years from being too heavily skewed towards specific sectors. Our differentiated individual ideas proved not to be so when entire sectors traded off. We have reoriented the portfolio to have more balance across a number of areas. For the first time in a long time, there is a similar amount of VAR emanating from healthcare, technology, industrials, and financials.

We were reminded last year that in a volatile market, there is a chance to buy everything at the price you prefer if you practice patience. Avoiding consensus is also essential. We are looking for securities that are beaten up – where our projections are not necessarily rosy but simply less dire than other investors’ – and not stories that are simple. Hunting where others are not should be easier now that so many assets have flowed away from event and activist funds. We have added data science to our toolkit for identifying interesting, uncorrelated opportunities. We start 2017 with the strongest team in the history of the firm and high expectations for our own performance this year.
Financials Equities

On November 8th, our financials portfolio was 4.4% of the fund. One day later, it was 6.0%; one week later, 10.5%; one month later, 11.8%. These figures actually understate the magnitude of the shift, however, as we reallocated half our initial holdings from high- multiple, FCF businesses in Payments, Ratings, and P&C (which traditionally outperform during periods of deflation), to more traditional reflationary exposures in Banks, Brokers, and, geographically, in Japan. This was a calculated top-down shift and was expressed in stocks where we had a fundamental view. Our conviction has only increased since we first initiated these investments; we have added exposure to each of the names in 2017.

Some believe the rally in financials has been driven by expectations of tax cuts, or the potential repeal of the Volcker Rule, or reduced compliance costs, or more relaxed capital regulations. Any and all of these things would bring material, additional upside to bank stocks. But our focus is different. The pendulum in monetary policy has begun to shift away from the past decade of extraordinary easing just as the pendulum in fiscal policy has begun to shift away from austerity and its limiting factors. The U.S. elections served as a marker for these policy shifts which, in our view, are bullish for rate-sensitive financials.

In terms of fundamentals, rising rates in the U.S. have the obvious benefit of boosting net interest margins. But this is particularly true today because banks are sitting on more excess cash and liquidity than at any time in history. Indeed, with over $4 trillion of liquidity parked at the Fed, many banks do not need additional deposit inflows to fund loan growth for years to come – they already have the cash on hand to lend. This amplifies the benefits of rising rates as banks raise lending rates without a corresponding hike in deposit rates. Rising rates also unlock activity across fixed income trading, which was crowded out by excessive easing, with negative-yielding bonds reaching $12 trillion on the cusp of the U.S. election. Furthermore, as relative policies between countries diverge, currency trading and hedging accelerates.

Both businesses – net interest income from loans and trading activity in Fixed Income, Currencies and Commodities (“FICC”) – have very high incremental pre-tax margins (>70%). Expanding interest income from higher rates or more velocity in trading does not require additional technology or more personnel – if anything, banks have been over-staffed and have over-spent for years during a period of subdued activity. This highlights a final key point: most will underestimate the significant operating leverage inherent in financials. In Q4, we continued to see improving cost/income ratios with compensation/revenues falling to record lows in some cases – a sign that shareholders may be put before employees in this cycle. Across our holdings, we see 200 – 450bps of ROE expansion in the next 2 years, and again, this is before tax cuts or deregulation is considered. Our bank stocks trade trade <10x earnings with high‐teens EPS growth ahead and at a small premium to tangible book value for returns that will expand into the mid‐teens. We continue to like what we own and are increasingly focused on expanding our global coverage to capture how these trends unfold outside the U.S.

Credit Update

Structured Credit

Since inception of the strategy for Third Point in 2009, structured credit has generated significant returns. Gains in the strategy have been driven primarily by opportunistic trading in the U.S. residential mortgage-backed security (“RMBS”) market. Over the past eight years, we have seen a massive decentralization in securitized products. When we began investing in ABS, nearly a dozen large financial institutions were able to distribute product flow, and trade in structured residential mortgage products was robust. Today, increased regulation has forced over half of these institutions to exit the market, limiting the opportunity set. Last year, we cut our exposure in U.S. RMBS and other areas of the structured credit market. Our exposure was once almost a quarter of the overall Third Point portfolio and is now less than 10%.

As our focus has shifted away from RMBS, we have been finding opportunities in new or different parts of the structured products universe. Roughly half of our current exposure is in Re-Performing Loan (“RPL”) securitizations where we took a medium-term view that the borrowers would continue to make mortgage payments and become clean-pay borrowers. The other key component of the portfolio is in the marketplace lending sector. As the origination and securitization of assets have become more difficult for larger financial institutions, smaller technology-driven platforms have filled the void. We have been working with several of the leading marketplace lenders to access or help create attractive securitizations with an optimal duration profile. We are excited about the opportunities in this quickly evolving market and in other, newer areas of ABS.

Corporate/Sovereign Credit

After gapping late in 2015 and early in 2016, high yield spreads are back to historical averages. The spread compression drove a 13.4% return in high yield for 2016 with depressed energy and materials segments doubling the performance of the overall high? yield market. Fortunately, we were concentrated almost entirely in these sectors and were able to profit from that dislocation, driving strong returns in credit last year.

Credit – like equities – is starting from a relatively high point in valuation this year and we expect the rising rate backdrop to provide a headwind. We have reduced our corporate credit exposure and hedged our interest rate risk across the board in the credit book. The distressed class of 2016 did not produce a stellar crop of post-reorg equities and we expect some freshly minted energy equities to turn out to be value traps. Retail is the only credit sector with relatively widespread distress but we have not yet seen a solution to address the increasing secular challenges in the brick and mortar retail world and so the distress is probably warranted.

In the sovereign space, we have reduced our exposure to Argentina but it continues to be a significant position in our portfolio. Argentina remains a major outlier when we look across the globe at sovereign yields relative to leverage, and most importantly, economic trajectory and governance. We believe that Greece is once again approaching a pinch point between populist promises and political-economic realities. As has been the case in the past, we expect a volatile reconciliation, but a reconciliation nonetheless, and are positioned to capitalize on the confusion surrounding that political process. Third Point has historically generated its strongest returns at the end of credit cycles as we use our cross capital structure approach to profit from credit, then post-reorg equities, and finally, fully-emerged equities. While we flourish in major dislocations, we have been able to bring the same mindset to more minor dislocations, capitalizing in environments when emotions run high. While America may or may not be made great again, there is no question that the rules are literally being rewritten and there is likewise no question that this process will be carried out in a flamboyant fashion. We do not plan to trade the tweets but we expect an increasing number of real and, even better, fake dislocations to create some extremely rewarding investing opportunities.


Third Point LLC