Is it possible to invest successfully with a spiritual perspective? Can one be super successful in the financial markets while maintaining a sense of compassionate purpose?​

#-ad_banner-#Believe it or not, there are individuals who have successfully combined the two seemingly incompatible qualities. The two largest hedge fund managers who cite spirituality as a linchpin to their success are Daniel Loeb of Third Point LLC and Ray Dalio of Bridgewater Associates. 

I profiled Dalio last summer, so in this article, I’ll focus on Loeb, his philosophy, and where he’s investing now.

Loeb and the Dalai Lama, Tibet’s spiritual leader, led a panel discussion at the American Enterprise Institute’s meeting in February. Loeb said: “Meditation, contemplation… it’s not just for monks and hermits. They are really for all people to improve our lives and businesses.”

A noted activist investor, Loeb has practiced yoga since 1995, even going to India to study under a master.

As he describes it, Loeb’s investing framework comprises three types of decisions:

	Foundational Decisions When it comes to the big choices in life, Loeb says, investors needs to be honest with themselves and with others to make the correct decisions. Dishonesty can only lead to future problems.​
	Choice Decisions These decisions are best made within a framework. Loeb’s philosophy is such that the framework is built upon morality and decisions that do no harm to others. ​
​	Trading Decisions Trading decisions are the most relevant decisions for investors on a day-to-day basis. Sometimes these decisions fall into a consistent pattern; other times they are completely new territory. Loeb credits his spirituality with helping him ignite the creativity needed to make these types of novel decisions. Loeb’s fund, Third Point, oversees $2.3 billion in assets and has returned 51.6% over the past three years. That success is evidence that mixing spirituality with hard-core capitalism can generate positive returns.

What’s Dan Loeb Thinking Now?
​Third Point recently revealed its latest ideas and strategies in a letter to investors. A few key takeaways:

Loeb thinks that the pullback that occurred earlier this year in several overinflated sectors is healthy for the market. In addition, he notes that the consensus hedge fund trades at the start of the year — such as long Japan, long momentum and short bonds — have all underperformed.

However, value stocks and emerging markets have accelerated. This change has resulted in hedge funds deleveraging, which Loeb says let him add to Third Point’s portfolio at attractive levels.

In the letter, Loeb goes on to mention that if real interest rates remain negative by this autumn, it will mark the longest such period in U.S. history. He expects the Federal Reserve will likely end its tapering this fall, with the first interest rate hikes to start in October, due to rising inflation and the unemployment rate dropping to near 6%.

Third Point is up 3.3% for the year, and Loeb points to corporate credit and mortgage investments as lifting the performance.

The fund’s three top stock holdings:

1. American International Group (NYSE: AIG )​

Third Point reduced its exposure to the insurance conglomerate by 25% during this year’s first quarter, but AIG still represents the fund’s largest stock holding, at 6.6% of the portfolio. ​

2. FedEx (NYSE: FDX )​

FedEx is Loeb’s second-largest stock holding, at 6.2% of the portfolio after a 25% increase in the first quarter. Loeb is on record as calling Fred Smith, the delivery company’s chief executive, one of the “great American CEOs.” As you can see from the daily chart, FedEx has recovered somewhat from its sell-off early in the year. However, price remains below the January highs.

3. Dow Chemical (NYSE: DOW ) ​

This is my favorite among Third Point’s holdings. Dow takes up 5.9% of the portfolio and was just added during the first quarter. In his letter, Loeb recognized the positive steps the company has taken (including increasing its dividend, currently yielding 3%) while pressured management for greater improvement. If the company heeds this advice, the uptrend should continue throughout 2014. Right now, price has pulled back to support at the 50-day simple moving average, creating an ideal trend trading entry point.​

Risks to Consider: No matter how successful a hedge fund manager, they still make mistakes. Never follow anyone blindly when it comes to your investments. Always do your own due diligence, and be sure to diversify and use stop-loss orders.

Action to Take –> First, consider applying spiritual principles to your everyday investing. This strategy has worked well for Dan Loeb.

Second, Dow Chemical is currently sitting on support at the 50-day simple moving average. Price has pulled back from its yearly uptrend and has set up as a solid buy.

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