Elliott Management hedge fund’s new trades in 3Q 2013 (Part 6 of 6)
In this six-part series, we will go through each one of the positions Elliott traded this past quarter.
Elliott Management is a New York based $20 billion+ event driven and distressed hedge fund run by the legendary Paul Singer. The fund is secretive in its approach, but sources attribute a 15% annual net return to its main fund since inception in 1977, compared to 11% for the S&P 500. The firm started new positions in Riverbed Technology (RVBD), Autodesk, Inc. (ADSK), News Corp. (NWS), NVIDIA (NVDA) and sold 30%-40% of its positions in Delphi Automotive (DLPH) and NetApp (NTAP).
Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).
Why sell NetApp (NTAP)?
NetApp is a risky investment currently because of its exposure to the US Federal government and European businesses. Sales to original equipment manufacturers (OEMs) for NetApp have been in decline for the last three years. Even though the company guided to gross margins of 61% in 2014, which was in line with year, its revenue outlook continues to be week. A reason for buying NetApp earlier in the year was the fact that the company announced a $1 billion stock buyback in 2013 and another in 2014. We feel that at this point, company buybacks have been priced into the security. Without revenue growth, the buybacks won’t probably have much further impact on the stock. Furthermore, since more than 50% of the company’s sales are overseas, a stronger dollar would negative impact the business in the event that the US Federal Reserve begins to taper its quantitative easing program.
What does NetApp do?
NetApp, Inc. is a leading provider of innovative storage systems and data management solutions that form the foundation for efficient and flexible IT infrastructures. Its storage systems help customers streamline operations and lower the cost associated with storing and managing their data. The Company’s unified fabric-attached storage (FAS) platform offers the optimal storage platform for business applications, shared infrastructures, and cloud environments, while its E-Series platform offers modular flexibility and custom configuration capability for demanding workloads, with an optimized price to performance ratio. NetApp is the leading original equipment manufacturer (OEM) storage provider with a 15-year track record of enabling OEMs to offer market-leading IT and storage solutions that serve specific markets and customer requirements.
The Company was incorporated in 1992 and shipped the world’s first networked storage appliance one year later. Since then, it has brought to market many innovations in storage and data management.
More on Elliott Management
Paul Singer created Elliott Associates in January 1977, starting with $1.3 million from friends and family. In its earliest years, the firm focused on convertible arbitrage. However, since the 1987 stock market crash and early 1990s recession, the firm has focused primarily on distressed debt investing, and is therefore commonly referred to as a distressed debt or vulture fund. More recently, the company has been focused on activism.
Elliott is noted for its relatively high returns and low volatility. The New York Times has called Paul Singer ‘one of the most revered’ hedge fund managers on Wall Street. The firm is currently closed to new investors. As of mid-2008, Elliott had 175 employees in New York, London, Tokyo and Hong Kong.
Browse this series on Market Realist:
- Part 1 - Elliott hedge fund opens new positions in RVBD, ADSK, NWS, NVDA, Sold DLPH, NTAP – 13F Flash (A)
- Part 2 - Elliott hedge fund opens new positions in RVBD, ADSK, NWS, NVDA, Sold DLPH, NTAP – 13F Flash (B)
- Part 3 - Elliott hedge fund opens new positions in RVBD, ADSK, NWS, NVDA, Sold DLPH, NTAP – 13F Flash (C)