Why Billionaire Dan Loeb Is Betting Big on UBS Stock


  • Shares of UBS Group (UBS) stock are little changed today.
  • However, investors are pricing in some interesting commentary from billionaire investor Dan Loeb.
  • Loeb appears to believe that UBS stock provides a compelling risk/reward bet in this current environment.
UBS stock - Why Billionaire Dan Loeb Is Betting Big on UBS Stock

Source: shutterstock.com/Judith Linine

There are plenty of catalysts and headwinds investors are pricing in right now. Of course, still-high inflation, rising interest rates, and uncertainty around a recession are among the top items on most investors’ minds. However, the recent banking crisis, which resulted in consolidations, such as the takeover of Credit Suisse by UBS Group (NYSE:UBS), is also a key consideration for many. Today, UBS stock is little changed, though there is some news tied to this stock that investors are watching right now.

Billionaire investor Dan Loeb recently revealed in a shareholder letter that he has switched from owning Credit Suisse bonds to UBS stock over the past quarter. This move signaled his support for the takeover and has bolstered some investors’ confidence in the ability of UBS to integrate Credit Suisse’s portfolio into its own.

Let’s dive into what to make of this news and whether this could signal the banking crisis is closer to its end than its beginning.

Is UBS Stock a Buy?

Dan Loeb is widely considered one of our generation’s best investors. Thus, when he’s buying as others are selling, the ears of many perk up.

Loeb’s stated rationale in his shareholder letter as to why he switched from the company’s paper to its equity is compelling. Loeb noted that:

“…we determined that once the emergency rescue acquisition was announced, the equity of UBS presented the more compelling way to invest in this situation and rotated capital from CS bonds into UBS stock. We see the rescue of CS as a transformative deal for UBS at a highly compelling price and with downside-protected terms.”

Thus, it appears to be his view that this is a favorable risk/reward bet that could yield substantial gains from here.

Considering the recent rally in various regional, mid-size and large-cap banks, it appears Loeb’s bet has been directionally correct. On a year-to-date basis, the stock chart of UBS is best described as a roller coaster. And while some of the gains from its lows have been given up, it appears there’s some strong price action in the sector that could buoy this stock in the near term.

The question is whether this bet will be right over the medium- to long-term. Personally, UBS stock is on my watch list now, and I will keep an eye on this stock moving forward.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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