Activist Guru Dan Loeb Leaves His Mark in Many Ways

Scores of children have been influenced by Barbie dolls and Hot Wheels cars over the years, but few, if any, have been influenced in quite the way guru Daniel Loeb (Trades, Portfolio) was. His great aunt, Ruth Handler, co-founded toy company Mattel Inc. (MAT, Financial) in 1945 and created the Barbie doll, Mattel’s best-selling toy, in 1959 – both before Loeb was born.

“I associated success in business with Hot Wheels and Barbie dolls,” Loeb told an audience five years ago. “I think it was a very powerful enforcer early on to like business.”

He may have learned about business success through his family’s toy company, but investing is hardly child’s play for Loeb. “Even then he wasn’t all that laid-back. He has claimed he dreamed from an early age about being an investor,” wrote William Cohan in Vanity Fair. “I used to write down ‘Third Point’ over and over—‘Third Point Partners,’ ‘Third Point Partners,’” Loeb said.

The word prodigy might not necessarily apply to the young Loeb, but a nickname he was given by a high school teacher – Milo Minderbender – is revealing. Fans of Joseph Heller’s “Catch-22” may recall that the character of Minderbender was a war profiteer who was fascinated by the stock market – and who has been described as a “parody” of the American dream.

In fact, the word activist – which is a word that has been used to describe Loeb before, including by Loeb himself – might be a more fitting word for him, given his appearance. He looks young for his years (52), perhaps in part because of his affinity for surfing, yoga and Transcendental Meditation. The name “Third Point” actually came from a spot on Malibu's Surfrider Beach.

A graduate of Columbia University, Loeb had made $120,000 in the stock market by his senior year, but he lost his money on an investment that taught him a lesson, he said, in “overconcentrating positions.”

“The only thing I care about,” he told New York magazine, “is making money for my investors.” Toward that end, he founded Third Point Partners, a New York-based hedge fund with a portfolio currently worth $14 billion, in 1995.

His typical business blueprint is to acquire struggling companies, replace ineffective managers and management practices and make the company prosperous. Following that strategy, Loeb has been quite successful. In April of this year, Forbes estimated Loeb’s personal worth at $2.3 billion.

Recently, MarketWatch reported that “Third Point has a ‘significant position’ in eBay Inc. (EBAY, Financial) and is ‘very pleased’ with the PayPal split.”

“Ebay announced on Tuesday it will spin off PayPal into a separate publicly traded company after more than a year of pressure from another activist investor, Carl Icahn (Trades, Portfolio),” reporter Sital Patel wrote this week.

A few weeks ago,when it was reported that Third Point was showing an interest in Adidas (ADS, Financial), shares in the company were “soaring.”

“Loeb’s largest new positions started in the second quarter are: Ally Financial Inc. (ALLY), Rackspace Hosting Inc. (RAX), IAC/InterActiveCorp (IACI), FMC Corp (FMC) and Finisar Corp (FNSR),” wrote Holly LaFon for GuruFocus in August.

Loeb’s portfolio also includes holdings in Actavis PLC (ACT, Financial), American International Group (AIG, Financial), Sothebys (BID, Financial), T-Mobile US (TMUS), Liberty Global PLC (LBTYK) and Dollar General Corp (DG).

But while he may protest that making money is the only thing he cares about, Loeb does seem to care about other things, too, and he has been known to express his feelings somewhat abrasively. He has a reputation for passionate public letters that have been critical of CEOs and other investment managers. Loeb has called it the “moral indignation business,” and that indignation seems to strike a chord. He has built a sizable readership among his peers because, as one observed, he “articulates what people feel.”

Loeb “has always had a big mouth,” wrote Deepak Gopinath at scribd.com, and he sometimes expresses negative opinions even when they don’t reflect well on people or causes he has supported in the past. For example, Loeb helped raise funds for Barack Obama when he first sought the presidency in 2008, but he has expressed his growing dissatisfaction with what he has characterized as the president’s “class warfare” tactics.

People do listen to what he says. It was reported yesterday, for example, that Loeb successfully pressured Dow Chemical (DOW) to divest some of its businesses, contending that it would mean higher yields and better value. The folks at Dow clearly paid attention to what he had to say.

He exerts his influence in other ways.

A steadfast supporter of education, Loeb endowed the Daniel S. Loeb Scholarship for undergraduate study at his alma mater, he has been a trustee of Prep for Prep, a New York City organization that prepares underprivileged children to attend competitive independent schools, and he co-founded Students First New York, the state branch of the national education advocacy organization.

He has also been a proponent of same-sex marriage. Last year, he signed an amicus curiae brief to the Supreme Court in support of same-sex marriage.