A Detailed Review Of Elliott Management’s $16 Billion Portfolio
By: Vintage Value Investing
Harvest Exchange
February 27, 2018
A Detailed Review Of Elliott Management’s $16 Billion Portfolio
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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.
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 $16.0 billion according to the latest filing. The list value of stock holdings is down -5.8% when compared to the last quarter. As a benchmark, the S&P 500 was up 6.1% over the same period.
Quarter-over-Quarter Turnover (QoQ Turnover) measures the level of trading activity in a portfolio. Elliott Management’s QoQ Turnover for the latest quarter was 23.9%, so the firm appears to trade a significant percent of its portfolio each quarter.
Elliott Management’s Largest Holdings
The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below at the Elliott Management page. The following table summarizes the firm’s largest holdings reported in the last filing:
Ticker | Name | Holding ($mil) | % Of Portfolio |
|---|---|---|---|
QQQ | POWERSHARES QQQ TRUST | $2,302.8 | 14.5% |
NXPI | NXP SEMICONDUCTORS N V | $1,924.7 | 12.1% |
ARNC-W | ARCONIC INC | $1,392.5 | 8.8% |
HES | HESS CORP | $1,016.8 | 6.4% |
BTU | PEABODY ENERGY CORP NEW | $834.4 | 5.3% |
XOP | SPDR SERIES TRUST | $719.1 | 4.5% |
CTXS | CITRIX SYS INC | $624.0 | 3.9% |
The seven positions above represent 55.5% of the fund’s total portfolio. PowerShares QQQ Trust, Series 1 (ETF) (Nasdaq: QQQ) is the largest position held by Elliot Management. It is an exchange-traded fund based on the Nasdaq-100 Index. The index includes 100 of the largest nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.
Elliott Management’s 7 Largest Purchases
I also used finbox.io to find Elliott Management’s largest buys last quarter. Here’s the list of the biggest stock purchases determined by comparing the last two filings:
Ticker | Name | Purchased ($mil) | % Of Portfolio |
|---|---|---|---|
QQQ | POWERSHARES QQQ TRUST | $559.3 | 14.5% |
IWM | ISHARES TR | $551.1 | 3.5% |
MD | MEDNAX INC | $132.3 | 0.8% |
AKAM | AKAMAI TECHNOLOGIES INC | $130.1 | 0.8% |
UNIT | UNITI GROUP INC | $122.3 | 0.8% |
CVG | CONVERGYS CORP | $106.2 | 0.7% |
QEP | QEP RES INC | $100.5 | 0.6% |
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 $551.1 million with the holding now representing 3.5% of the firm’s portfolio.
Elliott Management’s 7 Biggest Sells
Here’s the list of biggest position reductions determined by comparing the last two filings:
Ticker | Name | Sold ($mil) | % Of Portfolio |
|---|---|---|---|
HYG | ISHARES TR | $741.7 | 3.6% |
ECA | ENCANA CORP | $441.8 | 2.6% |
SMH | VANECK VECTORS ETF TR | $383.9 | 0.8% |
MPC | MARATHON PETE CORP | $320.5 | 1.9% |
AA | ALCOA CORP | $292.2 | 1.0% |
XLE | SELECT SECTOR SPDR TR | $273.9 | 1.6% |
XOP | SPDR SERIES TRUST | $184.0 | 4.5% |
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.
Ticker | Name | Price 1-mo Ago | Current Price | % Change 1-mo |
|---|---|---|---|---|
CRMD | CORMEDIX INC | $0.47 | $0.30 | -35.9% |
AA | ALCOA CORP | $54.00 | $46.64 | -13.6% |
QEP | QEP RES INC | $10.27 | $8.99 | -12.5% |
DVMT | DELL TECHNOLOGIES INC | $82.74 | $72.58 | -12.3% |
HES | HESS CORP | $53.69 | $47.95 | -10.7% |
PAH | PLATFORM SPECIALTY PRODS COR | $11.81 | $10.64 | -9.9% |
SAH | SONIC 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:
Ticker | Name | Upside (Analyst Target) | % Of Portfolio |
|---|---|---|---|
QEP | QEP RES INC | 50.5% | 0.6% |
MITL | MITEL NETWORKS CORP | 40.1% | 0.4% |
DVMT | DELL TECHNOLOGIES INC | 37.8% | 2.9% |
PAH | PLATFORM SPECIALTY PRODS COR | 35.0% | 0.7% |
AA | ALCOA CORP | 32.2% | 1.0% |
TDW | TIDEWATER INC NEW | 30.3% | 0.1% |
NRG | NRG ENERGY INC | 25.4% | 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.
Author: Andy Pai
Expertise: financial modeling, mergers & acquisitions
Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:
Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets.
Andy can be reached at andy@finbox.io.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.
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