Billionaire Activist Paul Singer Moved Into Q4 With These Five Top Stocks

All hedge funds and other money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter. However, some may believe that because these public filings are delayed, that they are somewhat irrelevant, but you should keep in mind that top hedge fund firms are not day traders, swing traders, or other types of short-term oriented traders. Individual investors may use these public filings as part of their stock picking process, and the odds of stumbling upon great winners are relatively high. It is even safer to track billionaire activist hedge funds like Paul Singer’s Elliott Management, which generally tend to push for changes at struggling and undervalued companies so as to unlock shareholder value. Paul Singer’s hedge fund recently filed its quarterly 13F, so this article will lay out its five largest equity holdings at the end of the third quarter.

Professional investors like Paul Singer spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned 102% and beaten the market by more than 53 percentage points since the end of August 2012 (see the details).

#5 CDK Global Inc. (NASDAQ:CDK)

 – Shares Owned by Elliott Management (as of September 30): 7.94 Million

 – Value of Holding (as of September 30): $379.20 Million

Elliott Management upped its position in CDK Global Inc. (NASDAQ:CDK) by 1.34 million shares during the third quarter. The shares of the provider of integrated technology and digital marketing solutions to the automotive retail industry have advanced by 15% since the beginning of the year and are trading at a relatively rich trailing price-to-earnings ratio of 38.23, which compares with 22.70 for the S&P 500 Index. Earlier this year, the company initiated a three-year business transformation plan that aims to increase its operating efficiency and enhance its cost structure. CDK’s revenues are anticipated to reach an annualized growth of 4%-to-5% in the next three years and 5%-to-7% thereafter as a result. Scott Ferguson’s Sachem Head Capital Management was the largest equity holder of CDK Global Inc. (NASDAQ:CDK) in our database at the end of the third quarter, holding 11.84 million shares.

#4 Interpublic Group of Companies Inc. (NYSE:IPG)

 – Shares Owned by Elliott Management (as of September 30): 20.02 Million

 – Value of Holding (as of September 30): $382.89 Million

Paul Singer’s stake in Interpublic Group of Companies Inc. (NYSE:IPG) was unchanged during the September quarter at roughly 20.02 million shares, which accounted for 7.33% of the fund’s equity portfolio on September 30. The global advertising and marketing services company has seen its stock gain 9% in 2015 despite being caught in the August and September broader market sell-offs. Even so, the stock is trading at a cheap trailing P/E ratio of 18.89, which is noticeably below the mean for the S&P 500 companies. Interpublic Group of Companies also pays out an annualized dividend of $0.48, which offers a current dividend yield of 2.1%. Fir Tree, founded by Jeffrey Tannenbaum, increased its holding in Interpublic Group of Companies Inc. (NYSE:IPG) by 503,675 shares during the September quarter to 21.43 million shares.

#3 Citrix Systems Inc. (NASDAQ:CTXS)

 – Shares Owned by Elliott Management (as of September 30): 5.87 Million

 – Value of Holding (as of September 30): $406.74 Million

Paul Singer and his team were very bullish on Citrix Systems Inc. (NASDAQ:CTXS) during the latest quarter, as Elliot Management lifted its position in the multinational software company by a whopping 4.40 million shares. It appears that Paul Singer’s activist campaign on the cloud computing software maker has started to bear fruit. Earlier this week, Citrix Systems announced plans to spin-off its GoTo business into a separate, publicly-traded company, which will allow Citrix to focus on its core software virtualization business. Just recently, the company also announced a workforce reduction of about 1,000 jobs, accounting for at least 10% of its total workforce. Meanwhile, the stock is up by nearly 23% for the year and still has the potential to reach $90-to-$100 per share by the end of 2016, according to the activist investor. Bain Capital’s Brookside Capital Management reported owning 3.02 million shares of Citrix Systems Inc. (NASDAQ:CTXS) through its latest 13F filing.

#2 EMC Corporation (NYSE:EMC)

 – Shares Owned by Elliott Management (as of September 30): 34.00 Million

 – Value of Holding (as of September 30): $821.44 million

EMC Corporation (NYSE:EMC) gained one spot on the list of Paul Singer’s top stock picks during the latest quarter. The activist hedge fund increased its holding in the services provider of information technology operations by 400,000 shares during the three-month period that ended September 30. Earlier this week, the storage giant announced the introduction of newly-integrated and extended cloud capabilities that will connect more storage systems to both public and private clouds. Hence, it appears that EMC Corporation is well-positioned to benefit from enterprises’ transitioning of data and workloads to the cloud. Meanwhile, the stock is 15% in the red year-to-date, and several valuation metrics suggest that there is more upside for the stock in the upcoming years. John A. Levin’s Levin Capital Strategies holds 9.80 million shares of EMC Corporation (NYSE:EMC) as of September 30.

#1 Hess Corp. (NYSE:HES)

 – Shares Owned by Elliott Management (as of September 30): 17.80 Million

 – Value of Holding (as of September 30): $891.07 Million

Elliott Management did not make any adjustments to its position in Hess Corp. (NYSE:HES) during the September quarter, holding an equity stake of 17.80 million shares as of September 30. The global exploration and production company has had a rough year in terms of stock performance, with its shares declining by 18% year-to-date. The company’s exposure to commodity risks, which include the volatile prices of crude oil, natural gas liquids, and natural gas, as well as its exposure to currency exchange fluctuations, have put significant weight on its operations and financial performance this year. Phill Gross and Robert Atchinson’s Adage Capital Management lifted its stake in Hess Corp. (NYSE:HES) by 635,500 shares during the latest quarter, ending the three-month period with 1.06 million shares.

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