Billionaire investor Dan Loeb trumpeted his bets on Buffett-backed RH, crypto, and private companies in his Q2 letter

• Dan Loeb discussed his RH investment, his crypto beliefs, and why he’s eyeing private companies.
• The Third Point chief joined Warren Buffett’s Berkshire Hathaway as a RH shareholder last year.
• Loeb owns a stake in Sam Bankman-Fried’s FTX, and invested in SentinelOne years before its IPO.
• See more stories on Insider’s business page.

Billionaire investor Dan Loeb trumpeted his recent bet on RH, touted cryptocurrencies, and underlined the value of buying into private companies in his second-quarter letter to investors in his Third Point hedge fund.

Joining Warren Buffett

Third Point first invested in RH – formerly known as Restoration Hardware – in the fourth quarter of 2020. The fund owned 278,000 shares, or 1.3%, of the high-end furniture retailer at the end of March. That position is worth $200 million today, based on RH’s current stock price of around $720.

In his letter, Loeb described RH CEO Gary Friedman as a “once-in-a-generation leader who is both an innovator and effective capital allocator.”

The fund manager also argued RH’s premium brand and novel strategy differentiates it from peers. “In the same way that Ferrari should not be compared to other auto manufacturers, we believe RH should not be considered a traditional furniture company,” Loeb said.

Warren Buffett’s Berkshire Hathaway may well share that view. The famed investor’s company has built an 8% stake in RH over the past two years that’s worth $1.3 billion today, largely thanks to RH’s stock price more than quadrupling in that timeframe.

True believer

Loeb described cryptocurrencies as a transformative innovation in his letter.

“While crypto is popularly viewed as an alternative (and speculative) asset class, we are most intrigued by its potential to become a disruptive technology, impacting broad swaths of the economy,” he said.

Loeb highlighted three of crypto’s key features: its accessibility and transparency, the prospect that it could speed up and reduce the cost of transactions, and the sense of independence it gives its fans.

The investor predicted “extreme volatility in price and sentiment” going forward, but argued that crypto’s rich potential outweighed those challenges. He also downplayed the risk of a regulatory crackdown, suggesting it could clarify the industry’s rules and attract more money.

Loeb’s crypto beliefs have spurred him to invest in CipherTrace, which helps crypto exchanges comply with financial regulations, Bitwise, a passive-asset manager, and FTX, the digital-asset exchange founded by crypto billionaire Sam Bankman-Fried.

Getting in early

Third Point invested in SentinelOne at a post-money valuation of $98 million in 2015. The cybersecurity company went public this summer and now carries a $14 billion market capitalization, valuing the fund’s stake at well over $1 billion today.

Loeb highlighted that massive gain to underscore how lucrative bets on private companies can be. He described them as an “indispensable way for us to create significant positions which we would never be able to replicate by waiting for such companies to come public.”

The fund manager also noted that he’s finding plenty of excellent businesses off the beaten track.

“We see many high-quality companies ‘hiding out’ behind the opaque curtain of corporate reorganizations, or smeared by the taint of having come public in an unorthodox manner and bearing the four scarlet letters “S-P-A-C,” he said.