Wednesday, August 1, 2012

Third Point Q2 Letter

Via Market Folly: 

In times of turmoil, we look for “fat pitches” that come from factors like forced or panicked selling, market dislocations, or a move in the cycle away from greed towards fear. With all of the mayhem in Europe in the past 12 months, we have been able to find quite a few of these types of investments while remaining disciplined about avoiding anything in the region that falls outside of our very narrowly defined investment parameters. Investors are familiar already with our profitable trades in Eksportfinanz credit, the Unicredito rights offering, and Portuguese sovereign bonds, as we have discussed these in previous letters and in conversations with many of you. Each represented a sizeable opportunity driven by a negative event resulting in a mispricing that we believed would remedy itself within 12‐18 months. We were able to deploy dry powder decisively and take profits quickly when equilibrium was restored, capitalizing on the fear resulting from an unexpected, downside-inducing event in a market already spooked by its own shadow.