Billionaire Paul Singer’s Top Picks for 2016

Billionaire Paul Singer is one of the most revered hedge fund managers on Wall Street and makes the list of the top-20 most successful hedge fund managers in history, with Mr. Singer’s Elliott Management ranking as the ninth-most successful hedge fund vehicle in history as of the end of 2015. The New York-based trading firm was launched in 1977 with just $1 million in capital and currently has assets under management amounting to more than $27 billion. The billionaire investor is widely-known for his activist strategies, but he is also notorious for his investments in sovereign wealth debt. Data compiled by Insider Monkey shows that Elliott Management’s long positions in companies with a market capitalization above $1 billion generated a negative weighted average return of 8.4% in 2015, based on the size of each position at the beginning of each quarter. Given that Paul Singer, like other many activists in the industry, tends to act as an additional catalyst that can increase shareholder value, individual investors might find his equity portfolio particularly constructive and full of high-potential investment ideas. That being said, this article will discuss Elliott Management’s top five equity positions as of the end of the fourth quarter of 2015.

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#5 Citrix Systems Inc. (NASDAQ:CTXS)

– Shares Owned by Elliott (as of December 31): 6.71 Million

– Value of Elliott’s Holding (as of December 31): $507.35 Million

Paul Singer upped his stake in Citrix Systems Inc. (NASDAQ:CTXS) by 835,544 shares during the final quarter of 2015, ending the year with 6.71 million shares. In June 2015, Mr. Singer sent a public letter to Citrix Systems, urging the software company to sell off non-core businesses, cut its portfolio of product offerings, buy back shares and undertake cost cutting efforts. The two parties agreed to cooperate, which resulted in Elliott receiving a seat on the company’s Board of Directors and appointing another mutually-elected independent Director. In November 2015, Citrix Systems announced plans to spinoff its “Go To” family of products into a separate company, which will enable the post-spinoff Citrix to focus its efforts on its strategic solutions that offer reliable delivery of applications and data. The company’s 2015 total net revenue reached $3.28 billion, up from $3.14 billion in 2014 and $2.92 billion in 2013. Citrix shares are up by 5% over the past 12 months and trade at an attractive forward P/E multiple of 12.97, which is below the ratio of 14.20 for the Information Technology industry. Cliff Asness’ AQR Capital Management reported owning 1.86 million shares of Citrix Systems Inc. (NASDAQ:CTXS) via its most recent 13F.

The following two pages has the top four picks of Elliott Management heading into 2016.

#4 Allergan plc (NYSE:AGN)

– Shares Owned by Elliott (as of December 31): 2.02 Million

– Value of Elliott’s Holding (as of December 31): $631.41 Million

Elliott Management was very bullish on Allergan plc (NYSE:AGN) during the December quarter, as the activist fund boosted its stake in the company by 1.36 million shares quarter-over-quarter to 2.02 million shares. The total number of billionaires tracked by Insider Monkey with long positions in the Botox-maker increased to 29 from 26 during the fourth quarter. Allergan and Pfizer Inc. (NYSE:PFE) announced a mega tax inversion deal in November 2015, which will create the world’s largest drugmaker. A number of financial hubs, including RBC Capital Markets, believe that the multi-billion dollar merger is unlikely to fail, which means that investors can monetize on the gap between Allergan’s current share price and the deal price. Specifically, the shares of Allergan are currently trading at a 16% discount to the value of the merger, which assigns Allergan’s stock a value of approximately $334 per share. Andreas Halvorsen of Viking Global cut his stake in Allergan plc (NYSE:AGN) by 1.22 million shares during the October-to-December period, to 5.98 million shares.

#3 Alcoa Inc. (NYSE:AA)

– Shares Owned by Elliott (as of December 31): 67.10 Million

– Value of Elliott’s Holding (as of December 31): $662.28 Million

The billionaire activist investor initiated a new position of 67.10 million shares in Alcoa Inc. (NYSE:AA) during the last three months of 2015, which was valued at $662.28 million. According to a 13D filed earlier this month, the aluminum producer and Mr. Singer and his team reached an agreement under which the size of the company’s Board of Directors was increased to 15 members, with Ulrich Schmidt, Sean O. Mahoney, and John C. Plant joining the Board. Let us remind you that Alcoa plans to separate the upstream aluminum production and midstream production side of its business from its higher-value businesses, creating two independent, publicly-traded companies. In a separate 13D filing submitted with the SEC in the second half of 2015, Mr. Singer called Alcoa’s shares “dramatically undervalued by the public market” and also saluted the company’s spinoff intentions. The shares of Alcoa are 17% in the red year-to-date, extending their one-year loss to 48%. Ken Griffin’s Citadel Advisors LLC owns 5.66 million shares of Alcoa Inc. (NYSE:AA) as of the end of 2015.

#2 Hess Corp. (NYSE:HES)

– Shares Owned by Elliott (as of December 31): 17.80 Million

– Value of Elliott’s Holding (as of December 31): $862.94 Million

Elliott Management made no changes to its equity position in Hess Corp. (NYSE:HES) during the fourth quarter, owning 17.80 million shares which accounted for 10.44% of the fund’s equity portfolio. The producer of natural gas and crude oil is one of the biggest activist targets of Mr. Singer, who initially revealed a position in Hess in the second half of 2012. The activist investor claimed that the company had lacked discipline and Board accountability, which eventually caused Hess to overstretch internationally at the expense of profiting from the drilling boom in the shale oil fields on the North American continent. Earlier this month, analysts at Goldman Sachs upgraded the stock to the prized ‘Conviction Buy’ list from ‘Neutral’, with a price target of $59, citing new project startups, shale flexibility, liquidity and its ability to find additional resources. The oil company has seen its shares decline by 44% over the past 12 months. Fir Tree, founded by Jeffrey Tannenbaum, reported a stake of 2.90 million shares of Hess Corp. (NYSE:HES) via its most recent 13F filing.

#1 EMC Corporation (NYSE:EMC)

 – Shares Owned by Elliott (as of December 31): 42.23 Million

 – Value of Elliott’s Holding (as of December 31): $1.08 Billion

Mr. Singer’s Elliott lifted its position in EMC Corporation (NYSE:EMC) by 8.23 million shares during the December quarter to 42.23 million shares. The increased stake was valued at $1.08 billion at the end of December and accounted for 13.12% of the fund’s equity portfolio. In October 2015, Dell announced an agreement to acquire the network storage giant for roughly $67 billion. Dell officials said that “the revenue synergies here are three times larger than the cost synergies”, while Mr. Singer applauded the deal by saying that “this landmark transaction will create a powerhouse with leading franchises across enterprise IT”. The shares of EMC are down by 2% since the beginning of 2016. It should be mentioned that the deal is expected to close in mid-2016. Seth Klarman’s Baupost Group added a 29.25 million-share position in EMC Corporation (NYSE:EMC) to its portfolio during the December quarter.

Disclosure: None