Below are the billionaire Paul Singer’s top 5 stock picks. for a comprehensive list please see Billionaire Paul Singer’s Top 10 Stock Picks.
5. Marathon Petroleum Corporation (NYSE: MPC)
Paul Singer’s hedge fund has been holding a position in Marathon Petroleum Corporation (NYSE: MPC) since the second quarter of 2019. Shares of the oil and gas refining and marketing company underperformed in 2020 due to pandemic related disruptions. Its shares are down 11% in the last twelve months.
First Eagle Investment Management had highlighted concerns over Marathon Petroleum Corporation fundamentals due to the pandemic. Here is what First Eagle Investment Management stated:
“Pervasive weakness across the energy sector, and in global refining markets and crack spreads specifically, pulled down Marathon Petroleum during the quarter. The stock was further hurt by early-March news that Japanese retailer Seven & i Holdings was scrapping plans to acquire Marathon’s Speedway gas station/convenience stores for $22 billion.”
4. eBay Inc. (NASDAQ: EBAY)
The hedge fund has benefited strongly from its eBay (NASDAQ: EBAY) position that it created at the beginning of 2019. Shares of the e-commerce platform rallied almost 60% in the last twelve months alone. In addition to share price gains, eBay also offers increasing dividends to investors. It has recently raised the quarterly dividend by 12.5% to $0.18 per share.
Steel City Capital, which returned 10% net of fees in 2020, highlighted few stocks including eBay in an investor’s letter. Here is what Steel City Capital stated:
“eBay (Long): EBAY continues to be a core holding in the Partnership’s long book despite not having any “sexy” attributes or unknown catalysts. I like eBay because it checks the boxes of being both capital light and priced as a value stock (low multiple of free cash flow), factors that are attractive in a potentially inflationary environment.
In 3Q’20 the company printed $2.6 billion of revenue vs. guidance of $2.4 billion (a $200 million beat) while full-year revenue guidance was taken up by $400 million, implying 4Q’20 would be higher by $200 million as well. Free cash flow from continuing ops was guided to $2.3 billion for the full year, slightly above the $2.0 billion the business regularly generated before getting a Covid/stimulus-related boost.
EBAY will have about $4.6 billion of cash on hand at year end5 and should receive another $2.0 billion in after-tax proceeds this quarter related to the sale of its Classifieds portfolio. Additionally, the company will receive 540 million shares from Adevinta which are currently valued at ~$8.3 billion, and also holds a warrant to purchase a 5.0% stake in payment processor Adyen which was last valued at ~$775 million. Additional asset sales are also not out of the question. Backing everything out at today’s market cap of $38.2 billion gives a clean market cap for the core marketplace of $22.6 billion. At a minimum, I expect $2.0 billion of free cash flow in FY’21, with the potential for a higher figure to the extent the incoming administration is successful in cutting additional stimulus checks. By FY’22, free cash flow should ramp to $2.3 billion after incorporating a full year’s contribution from the managed payments initiative. This values EBAY at 9.6x free cash flow, or 11.7x excluding stock-based comp.”
3. Tesla (NASDAQ: TSLA)
Paul Singer’s hedge fund kept a big convertible debt position in Tesla during the third quarter, accounted for 6.31% of the overall portfolio. The convertible debt position can be exchanged for common stock in the issuing company. He has also hedged its position through Tesla Puts. Tesla is one of the fastest-growing electric vehicle company in the world. It has generated profits in the past six consecutive quarters and plans to deliver 1 million vehicles by 2022.
Last month we shared billionaire Chamath Palihapitiya’s Tesla views in an article. Here is an excerpt:
For Chamath Palihapitiya, Tesla is a distributed energy business and not a mere car company. “They are figuring out how to harness energy, how to store it, and then how to use it in a way to allow humans to be productive”. He also stated that the ‘big disruption’ that’s coming is to power utilities. “There are trillions of dollars of bonds, of CapEx, of value sitting inside the energy generation infrastructure of the world that is going to go upside down and when that goes pear-shaped, Tesla will double and triple again,” he said.
Palihapitaya marked that a person fighting against climate change could potentially be the world’s first ‘trillionaire‘ because delivering clean energy and allowing the world to be sustainable is an ‘incredibly’ important thing to do that will be rewarded by markets and individuals.
“I don’t understand why people are so focused on selling things that work… Let’s just say I owned a billion dollars of Tesla stock, if I sold it now, I’ll have a billion-dollar problem. What do I do with that money?” Palihapitiya pointed out that when things are working, people are paid to stay with certain people that know what they are doing. “This is a guy who has consistently been one of the most important entrepreneurs in the world and so why bet against him?… You get behind these people who have an incredibly strong character, who know what they’re doing, who aren’t going to bend short-term profits and we’re just going to drive the train for 10 or 20 years and make the world a better place”.
2. Howmet Aerospace Inc. (NYSE: HWM)
Howmet Aerospace (NYSE: HWM) is the second-largest stock holding of Paul Singer’s 13F portfolio. Its shares fell 10% in the last twelve months despite some gains at the end of the year. The company’s exposure to the aerospace industry negatively impacted its share price during the pandemic year. Elliot Investment Management is the largest shareholder of Howmet Aerospace.
Howmet Aerospace provides advanced engineered solutions for the aerospace and transportation industries including jet engine components, aerospace fastening systems, and titanium structural parts.
1. Dell Technologies Inc. (DELL)
Billionaire Paul Singer’s position in Dell Technologies Inc. (NYSE: DELL) contributed to its 2020 returns. This is because shares of Dell rallied 55% in the last twelve months as staying at home policies has raised the demand for IT hardware, software, and services solutions worldwide.
Horizon Kinetics highlighted a strong bullish case for Dell Corporation in an investor’s letter. Here is what Horizon Kinetics stated:
“Dell made its fortune disrupting incumbent personal computer makers by employing a lower-cost, direct-to-consumer sales model, and by being willing to sustain a low margin. It is in the process of trying to repeat this strategy. This is through its 64% ownership stake in Pivotal Software Inc. (PVTL), a newly public subsidiary that has a $2.7 billion market capitalization. Its mission is to capture market share in cloud computing by underselling the competition, such as Amazon and Microsoft. It has only $657 million of annual revenue, so obviously it is much smaller than the Amazon and Microsoft cloud divisions, but it has grown by 134% cumulatively in the past 36 months. Pivotal Software operates at a loss. It is fairly well-capitalized and certainly would have access to more capital if required. Consequently, the transformation of cloud computing into a low margin commodity-type business has already commenced, albeit, at a very low level.”
Please also see 10 Cheap Healthcare Stocks To Buy Now and Billionaire Ken Griffin’s Top 10 Stock Holdings.
Disclosure: None.
