Stocks

Elliott Management’s $16 Billion Portfolio

Paul Singer and Elliott Management released its quarterly 13F filing with the SEC on February 14th which highlighted a number of stocks that the firm’s buying and selling. With seven positions making up more than half of its $16 billion portfolio, I take a closer look at the firm’s listed holdings below.

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How Paul Singer Unlocks Value

Singer started out in convertible arbitrage but is now better known for investing in distressed debt. When it comes to investing in companies he is an activist investor and likes to restructure companies if he believes value can be unlocked. He is not afraid to use litigation to support his strategy. Singer has a history of buying stakes in companies and then forcing a takeover by another company – at a higher price.

The following examples illustrate the methods Elliot uses to generate returns:

  • Singer bought 8% of Compuware in 2012, before making a bid to buy the entire company. Although he didn’t ultimately buy the company, he managed to restructure it and bid the share price up in the process.
  • At Alcoa, Elliot bought a large enough stake to secure three board seats. It then forced a restructuring and break up of part of the business. By the time Elliot sold its stake the fund had netted a 104% return.
  • In the case of Mentor Graphics Corp, Elliot bought a 9% stake before pushing for a takeover by Siemens. Elliot netted 68% in the process.
  • When Akzo Nobel NV rejected a takeover bid from PPG Industries Inc, Elliot sued the company to try to oust its chairman. Eventually, Elliot agreed to a partial restructuring before selling its stake.
  • Elliot is currently trying to stop a takeover of NXP Semiconductors by Qualcomm. They wanted Qualcomm to pay more for the company, or for NXP to find a better offer elsewhere.

These examples illustrate how Paul Singer treats each investment as a campaign. The goal of each campaign is to influence events to increase the value of his stake. He doesn’t win every time, but he wins often enough to keep his shareholders very happy.


Elliott Management's Latest Form 13F Filing

On February 14th, Paul Singer's firm Elliott Management filed its quarterly Form 13F regulatory filing. I reviewed the filing to gain a glimpse into the firm's large portfolio.

Elliott Management's stock portfolio totals $16.0 billion according to the latest filing. The list value of stock holdings is down -5.8% when compared to the last quarter. As a benchmark, the S&P 500 was up 6.1% over the same period.

Quarter-over-Quarter Turnover (QoQ Turnover) measures the level of trading activity in a portfolio. Elliott Management's QoQ Turnover for the latest quarter was 23.9%, so the firm appears to trade a significant percent of its portfolio each quarter.


Elliott Management's Largest Holdings

The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below at the Elliott Management page. The following table summarizes the firm's largest holdings reported in the last filing:

Elliott Management Largest Holdings
TickerNameHolding ($mil)% Of Portfolio
QQQPOWERSHARES QQQ TRUST$2,302.814.5%
NXPINXP SEMICONDUCTORS N V$1,924.712.1%
ARNC-WARCONIC INC$1,392.58.8%
HESHESS CORP$1,016.86.4%
BTUPEABODY ENERGY CORP NEW$834.45.3%
XOPSPDR SERIES TRUST$719.14.5%
CTXSCITRIX SYS INC$624.03.9%

The seven positions above represent 55.5% of the fund's total portfolio. PowerShares QQQ Trust, Series 1 (ETF) (Nasdaq: QQQ) is the largest position held by Elliot Management. It is an exchange-traded fund based on the Nasdaq-100 Index. The index includes 100 of the largest nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.


Elliott Management's 7 Largest Purchases

I also used finbox.io to find Elliott Management's largest buys last quarter. Here's the list of the biggest stock purchases determined by comparing the last two filings:

Elliott Management 7 Largest Purchases
TickerNamePurchased ($mil)% Of Portfolio
QQQPOWERSHARES QQQ TRUST$559.314.5%
IWMISHARES TR$551.13.5%
MDMEDNAX INC$132.30.8%
AKAMAKAMAI TECHNOLOGIES INC$130.10.8%
UNITUNITI GROUP INC$122.30.8%
CVGCONVERGYS CORP$106.20.7%
QEPQEP RES INC$100.50.6%

The largest purchase for the quarter was the PowerShares QQQ Trust ETF (Nasdaq: QQQ). Elliott Management increased its position in the company by $559.3 million and the stock now represents 14.5% of the firm's portfolio (largest position).

The next largest purchase was iShares Russell 2000 ETF (ARCX: IWM). The investment manager increased its position in the ETF by $551.1 million with the holding now representing 3.5% of the firm's portfolio.


Elliott Management's 7 Biggest Sells

Here's the list of biggest position reductions determined by comparing the last two filings:

Elliott Management 7 Biggest Sells
TickerNameSold ($mil)% Of Portfolio
HYGISHARES TR$741.73.6%
ECAENCANA CORP$441.82.6%
SMHVANECK VECTORS ETF TR$383.90.8%
MPCMARATHON PETE CORP$320.51.9%
AAALCOA CORP$292.21.0%
XLESELECT SECTOR SPDR TR$273.91.6%
XOPSPDR SERIES TRUST$184.04.5%

The largest sale for the quarter was iShares iBoxx High Yield Corporate Bond ETF (ARCX: HYG). Elliott Management reduced its position in the ETF by $741.7 million and the holding now represents 3.6% of the firm's portfolio.

The largest stock sale was Encana Corporation (NYSE: ECA). Elliott Management exited its position in the company by selling its $441.8 million stake.


Elliott Management's Recent Price Pull-Back Stocks

To find stocks in the firm's portfolio that may be unpopular at the moment and trading at cheap valuations, I ranked the firm's holdings by price pullbacks. The ranking table below lists the stocks in Elliott Management’s portfolio by stock price performance over the last 30 days.

Elliott Management Recent Price Pull-Back Stocks
TickerNamePrice 1-mo AgoCurrent Price% Change 1-mo
CRMDCORMEDIX INC$0.47$0.30-35.9%
AAALCOA CORP$54.00$46.64-13.6%
QEPQEP RES INC$10.27$8.99-12.5%
DVMTDELL TECHNOLOGIES INC$82.74$72.58-12.3%
HESHESS CORP$53.69$47.95-10.7%
PAHPLATFORM SPECIALTY PRODS COR$11.81$10.64-9.9%
SAHSONIC AUTOMOTIVE INC$22.45$20.30-9.6%

CorMedix Inc (NYSEMKT: CRMD) stock price has fallen by -35.9% over the last month. It may be worth taking a closer look at the stock, especially after this recent decline.


Elliott Management's 7 Bullish Analyst Targets

Banks and brokerages often release 12 to 18-month price targets for the stocks they cover. Analyst upgrades and downgrades alone can often impact a company's stock price.

"In the short run, the market is a voting machine but in the long run, it is a weighing machine." - Benjamin Graham

The table below ranks stocks in Elliott Management's portfolio with most bullish analyst targets:

Elliott Management 7 Bullish Analyst Targets
TickerNameUpside (Analyst Target)% Of Portfolio
QEPQEP RES INC50.5%0.6%
MITLMITEL NETWORKS CORP40.1%0.4%
DVMTDELL TECHNOLOGIES INC37.8%2.9%
PAHPLATFORM SPECIALTY PRODS COR35.0%0.7%
AAALCOA CORP32.2%1.0%
TDWTIDEWATER INC NEW30.3%0.1%
NRGNRG ENERGY INC25.4%1.8%

QEP Resources, Inc. (NYSE: QEP) appears to be the most undervalued stock in the fund based on the average price target from Wall Street analysts.


A Fearless Operator

Bloomberg called him the World’s Most Feared Investor, while Fortune magazine said he is one of the "smartest and toughest money managers in the hedge fund industry.” Others describe him as a vulture capitalist and the poster boy for greed.

Paul Singer is the founder and CEO of Elliot Management Corporation, one of the oldest hedge funds on Wall Street. He founded the company in 1977 after a short career as a lawyer. Today his company manages $23 billion, and Singer has built a personal fortune of $2.9 billion.

Singer is no stranger to controversy. He is most famous for suing the Argentinian government over bonds the country defaulted on. Singer’s firm eventually impounded an Argentinian naval ship in a Ghanaian port, using the ship as collateral in negotiations. The story ended with Argentina being forced to sell new bonds to repay the original bondholders.

The fight with Argentina was just one of the controversies Singer has been involved in. Another was when he started the chain of events at Samsung in 2015 that ended with the impeachment of the President of South Korea. He more recently got into a bidding war with Warren Buffett for control of a Texas Utility company and he also tried to force a restructuring at BHP Billiton, the world’s largest mining company.

Most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street (such as Elliot Management) can be a powerful way to narrow down the list.

Article by Andy Pai, Finbox.io