Editor's note: This is Pro Strategy, a column on how to use the philosophies of the smartest minds on Wall Street to generate quality investment ideas.
Dan Loeb is one of the most respected activist hedge fund managers out there, generating stunning gains for his investors over the last two decades. How can we learn from his success and apply his investment philosophy to a current stock?
Since 1996, the Third Point Offshore Fund returned 15.8 percent annually versus the S&P 500's 7.3 percent return through March. His hedge fund has generated "gross trading profits of over $12 billion" for investors, according to a July 2015 letter. In total, Third Point manages $17 billion.
CNBC Pro researched Loeb's investment strategy using Third Point client letters and comments from industry peers. We then used two of Loeb's favorite investing frameworks to analyze an investment idea.