Billionaire Dan Loeb Doubles Down on Approach in Trump Era

The first weeks of Donald Trump's presidency have seen high levels of turmoil in the political and financial realms. Investors seem to be cautiously optimistic that Trump's fiscal policies and regulatory changes will help big business and, in turn, line their pockets. But without any real changes in fiscal policy having been announced as of yet, much of the post-election rally has been founded on assumptions. That has not stopped fund manager Dan Loeb of Third Point LLC from maintaining a sense of optimism. In fact, Loeb believes that there is still plenty of room for growth in the Trump era and the post-election rally scenario.

Loeb indicated in a call with Bloomberg that "given the increase in S&P earnings that we expect due to changes in policy as well as tax reform," he doesn't believe that the market rally is "as overvalued as people think. We're seeing plenty of good valuation situations." Loeb backed up his statement by adding on to existing bets on both industrial and financial companies in the period immediately following Trump's shocking victory in the election. At the same time, Loeb backed down on investments he had in technology, telecommunications, and media. He expects that there are more opportunities in which valuations may be possible for companies undergoing transformations through mergers and acquisitions or through spinoffs.

Loeb indicated that the complexity of the current situation "is obscuring the earnings power of the company or companies that are going through a financial or operational restructuring," adding that Third Point is "not really fazed by that." Loeb, who has for years been trailing the S&P 500 in terms of returns, is likely seeing a change in his own investment horizons if the rally continues as he predicts.

What is leading to his sense of optimism in the climate for Wall Street elite? "What gives me confidence about the future is I just think we've had a paradigm shift with the new administration in terms of having a backdrop that is supportive of business and pro-growth. There will also be an increase--we're already seeing it--in corporate activity, which something where we typically thrive." Third Point Reinsurance dropped by a few cents in the end of last week. The company posted a loss for the fourth quarter, dropping by about $46.7 million. The disappointing figures have prompted CEO John Berger to step down. He will be replaced by COO Rob Bredahl. Third Point remains one of the most popular and prominent hedge funds and reinsurance groups in the nation, and Loeb is nonetheless looked to as an authority on investment decisions by investors of all types.