Hedge Funds

Loeb's Third Point added industrial Dover in third quarter; shares jump

Key Points
  • "During the third quarter, we invested in Dover, an industrial conglomerate with a $15 billion market capitalization," Loeb wrote.
  • "We have been engaged in a constructive dialogue with management regarding several compelling value creation opportunities," the fund manager added.
  • The hedge fund's Offshore Fund is up 14.5 percent this year, topping the market, according to the letter.
Daniel Loeb
Jacob Kepler | Bloomberg | Getty Images

Daniel Loeb's Third Point added industrial conglomerate Dover Corp. in the third quarter, according to an investor letter obtained by CNBC.

The hedge fund's Offshore Fund is up 14.5 percent this year, topping the market, according to the letter.

"During the third quarter, we invested in Dover, an industrial conglomerate with a $15 billion market capitalization," Loeb wrote. "Dover has leading share in several highly consolidated end markets, including retail fueling, industrial printing, retail refrigeration equipment, and artificial lift for U.S. onshore energy production."

Loeb said the company's shares have "materially" underperformed its industrial peers during the last three years.

"We have been engaged in a constructive dialogue with management regarding several compelling value creation opportunities," he said.

Dover shares jumped nearly 5% Friday after the position was revealed.

Loeb shared his three recommendations for the company to create shareholder value:

1. "Separate the Energy Segment."

2. "Address Underearning in Core Industrial Portfolio."

3. "Optimize Capital Allocation."

He noted that the company's stock has rallied on its recent announcement that it is considering "strategic alternatives" for its energy business.

"While Dover shares have started to appreciate since these announcements, we still see significant upside with shares trading at 14x 2019 estimated free cash flow versus the broader multi-industrial peer group that trades at 18x 2019 consensus free cash flow," the letter said.

Third Point declined to comment.

— With reporting by CNBC's Scott Wapner