market folly

Hot off the SEC filings press we just saw that Dan Loeb's hedge fund Third Point LLC has filed a 13G on Energy Partners (EPL). In the filing, we see that due to activity on September 21st, 2009 Third Point now has a 9.1% ownership stake in EPL with 3,636,559 shares. This is a new equity position for them as they previously did not own shares as of June 30th, 2009 when we looked at their portfolio via 13F filing. However, this is most likely because they probably owned senior notes on EPL that were recently converted into equity as EPL emerged from Chapter 11. While we can't be 100% certain that this is how they obtained shares, it is the most logical explanation as numerous other hedge funds filed similar 13G's on the same date, implying that they all took part in the equity conversion. One other such fund was Thomas Steyer's Farallon Capital, who we disclosed yesterday now also owns EPL equity.

As noted in our hedge fund performance numbers post, Third Point was up 6.4% for August and 5.1% for September and are now up 27.8% year-to-date. Third Point is a multi-billion dollar hedge fund that has seen annual returns greater than 15% since inception. Manager Dan Loeb focuses on event driven and value oriented investments and recently said he feels "like a kid in a candy store" due to all the distressed opportunities. In his letter to investors, Loeb noted that he liked selective automotive debt plays. For more market insight, we highly recommend checking out Dan Loeb's recommended reading list.

Taken from Google Finance, Energy Partners is "an independent oil and natural gas exploration and production company. As of December 31, 2008, the Company had estimated proved reserves of approximately 90.8 billion cubic feet (Bcf) of natural gas and 21.6 million barrels (Mmbbls) of oil, or an aggregate of approximately 36.8 million barrels of oil equivalent (Mmboe). The Company’s operations are concentrated in the shallow to moderate-depth waters in the Gulf of Mexico focusing on the areas offshore Louisiana, as well as the deepwater Gulf of Mexico at depths less than 5,000 feet. As of December 31, 2008, the Company had working interests in 24 producing fields, primarily located in the Gulf of Mexico region."

Lastly, make sure to watch this video of a recent speech he gave where he details his background and walks us through how Third Point has handled the crisis.