By Svea Herbst-Bayliss
LAS VEGAS (Reuters) – Billionaire investor Daniel Loeb said on Wednesday that he sees room for restaurant chain company Yum! Brands <YUM.N> to potentially split off its China business, but said he is not pushing for that now.
“Yum is not an activist play from our perspective,” Loeb said at the SkyBridge Alternatives Conference, less than a week after telling investors that his $17.5 billion hedge fund Third Point LLC had taken a significant position in the stock.
He said he sees “enormous” upside for the stock, but did not give a price target. “Suffice it to say we don’t put $1 billion to work without (seeing a lot of upside),” he said in his first public comments about the investment.
Keith Meister, who runs $8 billion hedge fund Corvex Management, said earlier this week that his firm had built up a stake of more than 15 million shares in Yum and that he wanted the company to consider splitting off the China business.
Loeb said what attracted him to Yum was that the broader market had failed to recognize how the company was in the process of turning itself around after two food safety scares in China in recent years. Additionally, he said there is more chance to cut costs in the business in the United States.
The company’s stock price has gained 22 percent so far this year amid growing interest from investors.
Loeb was one of a handful of prominent investors speaking at the annual conference, better known as SALT, and several echoed the theme that investments in China make sense now.
“I don’t know anyone who has gotten rich by betting against China and I don’t expect that to happen,” he said.
Earlier in the day, Michael Novogratz, President of Fortress Investment Group <FIG.N>, said it is time to buy Chinese stocks, calling the country a nation of gamblers with the government encouraging bets on an equity “casino.”
At the same time Loeb said he still likes investments in Japan and the United States, forecasting that the U.S. stock market is “more likely to be higher next year than not.”
Loeb also acknowledged a rare misstep, saying that he got out of his position in Sony <6758.T> too early, noting he left between $1 billion and $1.5 billion on the table as the stock continued to rise after he sold.
“We got impatient,” he said about his bet on Sony, which he unveiled nearly two years ago.
(Reporting by Svea Herbst-Bayliss; Editing by Richard Valdmanis and Chris Reese)