We recently published a list of Billionaire Paul Singer’s Top 12 Long-Term Stock Picks. In this article, we are going to take a look at where Confluent, Inc. (NASDAQ:CFLT) stands against other Billionaire Paul Singer’s long-term stock picks.
The world’s “most feared investor,” Paul Singer, needs no introduction. He has built a reputation on Wall Street for his aggressive and litigious tactics that often generate significant shareholder value. While the 79-year-old billionaire investor is not as flashy or public as other activist investors, he has built a reputation for exploiting weaknesses in various asset classes.
Singer’s initial approach to investing was to target companies and even governments while purchasing extremely distressed debt. Therefore, he is best known as a “vulture capitalist” as a result of this tactic. Since then, he has diversified into a number of investment strategies, such as activist investing, portfolio management, and commodity trading.
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Elliott Management is the investment firm that Singer founded in 1977 with $1.3 million. It has grown to become one of the most successful and feared activist hedge funds, with about $19 billion in portfolio value. The firm serves as the management affiliate for hedge funds Elliott Associates L.P and Elliott International Limited. The firm boasts of an annual average return of 14% since inception. Likewise, it has only lost money in the two years since its inception.
Elliott Associates is one of the most tracked hedge funds and it employs an activist investment strategy. It also acquires significant though minority stakes in underperforming and distressed companies or assets with a view of unlocking long-term value. In addition, the firm strives to influence company management through strategic initiatives such as cost cuts, management changes and business sales to maximize shareholder value.
Singer’s investment firm also purchased distressed sovereign debt from nations like Argentina and Peru in the 1990s. The investments resulted in multi-million dollar repayments following years of legal disputes. In 2016 Singer received a $2.4 billion payout after warring with Argentina’s government over bond payments. A 2018 article in The New Yorker magazine called him a “doomsday investor” for his strategies, including corporate debt plays in companies.
Paul Singer’s investment record speaks for itself. His hedge fund, Elliott Management, returned 5.9% in 2022 as the S&P 500 went down 19%. Nevertheless, the firm underperformed in 2023, turning 4.3% compared to a 24% gain for the S&P 500. The underperformance came as Singer remained cautious amid concerns that The US economy was staring at an “extraordinarily dangerous and confusing period”.
In addition to the high interest rates, the billionaire hedge fund manager raised concerns about the overstretched valuations and prospects of paltry returns in the real estate and financial services sector. Fast forward, the equity market has continued to edge higher in 2024. The S&P 500 is already up by more than 30%, with valuations in various counters getting out of hand.
Nevertheless, macroeconomics shows improvement following the Federal Reserve’s bid to cut interest rates and steer the economy into a soft landing. As the Co-Chief Executive Officer and Co-Chief Investment Officer of Elliott Management, Singer has diversified his holdings as one of the ways of shrugging heightened volatility.
Consequently, billionaire Paul Singer’s top 12 long-term stock picks are spread across the basic materials, services and utilities segments. There are also healthcare, energy, and financial services holdings.
Our Methodology
To make the list of billionaire Paul Singer’s top 12 long-term stock picks, we scanned Elliott Management’s investment portfolio. We then settled on stocks the hedge fund has held for two years and more. Finally, we ranked the stocks in ascending order based on Elliott Management’s stake value.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of consultants in suits, discussing the importance of stream governance for real-time data.
Confluent Inc (NASDAQ:CFLT)
Elliott Management’s Stake Value: $17.67 Million
Elliott Management First Major Purchase: 2022
Number of Hedge Fund Holders: 39
Confluent, Inc. (NASDAQ:CFLT) is a data streaming company. It offers a platform that allows people to connect their applications systems and services like Confluent Cloud to connect applications, systems, and data layers on the cloud. The stock has gained 38.51% year-to-date, driven by strong financial results.
In the third quarter, Confluent, Inc. (NASDAQ:CFLT) subscription revenue was up by 27% year-over-year to $240 million as cloud revenue increased 42%. The increase underlined strong demand for the company’s cloud solutions. As of Q3 2024, the company’s revenue growth is still strong, having increased by 25.01% over the previous 12 months to $915.61 million. Likewise, clients spending over $100,000 on the company’s solution increased by 14% to 1,346.
The significant client base growth comes on confluent boasting of a comprehensive product portfolio offering end-to-end data streaming and analytical data estate. In addition, Confluent, Inc. (NASDAQ:CFLT) made a big move when it acquired WarpStream, a bring-your-own-cloud data streaming company, to expand its product line and target open-source Kafka users and cloud clients in highly regulated settings.
Overall, CFLT ranks 8th on our list of Billionaire Paul Singer’s long-term stock picks. While we acknowledge the potential of CFLT, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CFLT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
