In his latest Q2 2024 Letter, Dan Loeb emphasizes the importance of balancing investments between the digital and physical worlds.
While digital investments in areas like hyperscalers, AI platforms, and semiconductors remain crucial, Loeb highlights the appeal of physical world investments, particularly in companies with strong competitive moats, unique products, and capital-intensive industries that are hard to disrupt.
He mentions sectors like aggregates, nuclear power, life science tools, specialty alloys, and aerospace as examples. Despite the market’s focus on tech giants, Loeb sees value in adding these often-overlooked businesses to the portfolio for long-term stability and growth.
Here’s an excerpt from the letter:
Our investments in the digital world including hyperscalers, consumer AI distribution platforms, and semiconductors have a key place in the portfolio, as we have discussed in previous letters.
However, we are finding many investments in the “physical world” to be equally attractive. In a market consumed with technological disruption, we are focused on finding companies that are difficult to disrupt due to competitive moats, consolidated industry structures, unique products, or capital intensity that deter competitive investment.
Examples include aggregates, nuclear power, life science tools, specialty alloy manufacturers, and commercial aerospace manufacturers. It is understandable that in a market whose narrative is dominated by the “Magnificent 7”, these businesses receive less attention, but that is giving us even more reason to add these types of names to the portfolio when we can find them.
You can read the entire letter here:
Dan Loeb: Third Point Q2 2024 Letter
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