This article discusses the top 10 stock picks of Paul Singer’s Elliott Management at the end of the second quarter. If you want to know a quick snapshot of only the fund’s top five holdings, you can skip this and go directly to Paul Singer’s Latest Portfolio: Top 5 Stock Picks.
Paul Singer and activist investing are two words that invariably land up being used together. One cannot talk about activist investing without mentioning its stalwarts like Mr. Singer and Carl Icahn, who made billions by forcing company managements to get their act together. The name of Mr. Singer is still enough to send shivers down the spine of executives and corporate boards across the world. However, very few people know that Mr. Singer didn’t take the conventional route of earning a degree in economics or finance or getting an MBA before making inroads into the asset management industry. He obtained a B.S. in psychology from the University of Rochester in 1966 and a J.D. from Harvard Law School in 1969, following which, Mr. Singer worked as an attorney for law firms.
He left the legal profession in 1977 to start Elliott Management in New York with $1.3 million in seed capital from friends and family. In 2020, Elliott shifted its headquarters to West Palm Beach, Florida, and according to the firm’s website, it manages assets worth $55.7 billion and employs 499 people as of June 30, 2022.
Elliott Management, right since its inception, has focused on distressed securities. While it started as a hedge fund focusing on convertible arbitrage, Mr. Singer slowly shifted the fund’s focus toward companies and later countries facing financial trouble. In the past, Elliott has been involved in various well-publicized restructurings, including those of WorldCom, Enron, TWA, and MCI.
Elliott Management’s Portfolio
The most important finding from Elliott Management’s latest 13F filing was that the fund sold its entire stake in Twitter, Inc. (NYSE:TWTR) during the second quarter. The stake comprised 10 million shares of the company. Besides Twitter, Inc. (NYSE:TWTR), Elliott Management also liquidated all of its holdings in 10 companies and reduced its stake in 4 companies. Furthermore, the fund’s top 10 holdings at the end of June which included derivatives positions and names like Marathon Petroleum Corp (NYSE:MPC), Peabody Energy Corporation (NYSE:BTU) and Suncor Energy Inc. (NYSE:SU) alone accounted for almost 72% of the value of its $8.67 billion 13F portfolio at the end of June.
Paul Singer of Elliott Management
Our Methodology
At Insider Monkey, we track the portfolios of about 895 hedge funds as of the second quarter of 2022, closely monitoring the stocks they buy and sell. For this article, we selected Paul Singer’s top 10 stock picks based on Elliott Management’s most recent 13F filing with the SEC for the quarter ending June 30.
Paul Singer’s Latest Portfolio: Top 10 Stock Picks
10. Citrix Systems, Inc. (NASDAQ:CTXS)
Elliott Management’s Stake Value: $116,604,000
Percentage of Elliott Management’s 13F Portfolio: 1.34%
Number of Hedge Fund Holders: 42
Elliott Management has had a long history with Citrix Systems, Inc. (NASDAQ:CTXS). The fund acquired a stake in the enterprise software company for the first time in June 2015 and immediately asked for changes in how the company was being run. As a result, Elliott Management partner Jesse Cohn was given a board seat by the company, and he pushed for Citrix Systems, Inc.’s (NASDAQ:CTXS) then CEO, Mark Templeton, to be removed from that position, which eventually happened.
Citrix Systems, Inc.’s (NASDAQ:CTXS) stock performed reasonably well between June 2015 and November 2019 – returning over 100% versus the S&P’s 49.5% – the period Elliott Management held a stake in the company. In late 2019, Elliott Management disclosed that it had sold its entire holdings in Citrix Systems, Inc. (NASDAQ:CTXS), and Mr. Cohn resigned from the company’s board in early 2020.
Things became interesting when Elliott Management again initiated a position in Citrix Systems, Inc. (NASDAQ:CTXS), disclosing that it had built a stake worth over $1 billion on September 7, 2021. Immediately after revealing this information, Elliott Management made its intention clear that it was looking for a partner to take the company private. On January 31, Citrix Systems, Inc. (NASDAQ:CTXS) announced that its shareholders have agreed to sell the company to Elliott Management and Vista Equity Partners for an enterprise value of $16.5 billion. According to the terms of the deal, Citrix Systems, Inc.’s (NASDAQ:CTXS) shareholders would be getting $104 for each share they own, valuing the company’s equity at close to $13 billion. Regulators have already approved this deal in Turkey and the United States, and most analysts expect it to close soon.
9. Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD)
Elliott Management’s Stake Value: $121,800,000
Percentage of Elliott Management’s 13F Portfolio: 1.4%
Number of Hedge Fund Holders: 26
Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) was the only new entrant in Elliott Management’s top 10 stock picks during Q2. Although the fund has disclosed only a passive stake, which accounts for 3.72% of all the company’s outstanding shares, Elliott Management has started many of its activist campaigns and acquired companies of similar size by first building a passive stake.
Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) has been in the news multiple times this year. The company is the last rocket designer and manufacturer in the United States that still trades as an independent public company. In late 2020, aerospace and defense major Lockheed Martin Corporation (NYSE:LMT) announced that it would acquire Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) for $4.4 billion. However, in January 2022, the FTC said it would sue to block the acquisition as it would give Lockheed Martin Corporation (NYSE:LMT) a dominant position in solid fuel rocket motors and hurt other defense contractors.
Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) was also in the news because its former chairman, Warren Lichtenstein, who is an activist himself and the founder and chairman of Steel Partners Holdings LP (NYSE:SPLP), launched a proxy fight to take control of Aerojet Rocketdyne Holdings, Inc.’s (NYSE:AJRD) board. However, Mr. Lichtenstein lost the proxy fight that pitted him against the company’s CEO, Eileen Drake, and left the company’s board in June this year.
8. E2open Parent Holdings, Inc. (NYSE:ETWO)
Elliott Management’s Stake Value: $125,766,000
Percentage of Elliott Management’s 13F Portfolio: 1.45%
Number of Hedge Fund Holders: 26
Elliott Management initiated a stake in E2open Parent Holdings, Inc. (NYSE:ETWO) during the first quarter of 2021 by purchasing 25,171,131 shares and increasing it to 27,973,575 shares in the next quarter. However, since then, the fund has considerably reduced its stake in E2open Parent Holdings, Inc. (NYSE:ETWO) and owned only 16.16 million company shares at the end of June.
E2open Parent Holdings, Inc. (NYSE:ETWO) is based in Austin, Texas, and provides a cloud-based, end-to-end supply chain management SaaS platform. The company has a long and interesting history. Founded in 2000, the same year the tech bubble of the 1990s burst, E2open Parent Holdings, Inc. (NYSE:ETWO) went public in July 2012 through an IPO. After merely 3 years of going public, E2open Parent Holdings, Inc. (NYSE:ETWO) was acquired by Insight Venture Management LLC, a private equity and venture capital firm.
E2open Parent Holdings, Inc. (NYSE:ETWO) again became an independently traded public company in February 2021 via a SPAC, CC Neuberger Principal Holdings 1, which was put together by Neuberger Berman and CC Capital. Since going public, the stock initially traded in a range but started falling late last year and is now trading down by 32% year-to-date.
7. Uniti Group Inc. (NASDAQ:UNIT)
Elliott Management’s Stake Value: $192,881,000
Percentage of Elliott Management’s 13F Portfolio: 2.22%
Number of Hedge Fund Holders: 21
Uniti Group Inc. (NASDAQ:UNIT) is a specialized REIT that owns and operates over 6.7 million fiber strand miles and other communication infrastructure in the United States. Uniti Group Inc.’s (NASDAQ:UNIT) stock has fallen by more than 46% in the last five years but is currently trading very close to where it traded in the third quarter of 2020 when Elliott Management initiated its stake in the company. Apart from Elliott Management, other funds that had a substantial stake in Uniti Group Inc. (NASDAQ:UNIT) included Howard Marks’ Oaktree Capital Management and billionaire Ken Griffin’s Citadel Investment Group, which owned 3.4 million shares and 3.54 million shares, respectively, at the end of June.
Uniti Group Inc. (NASDAQ:UNIT) has slashed its quarterly dividend drastically from $0.60 per share it used to pay in 2018 to $0.15 per share it currently pays every quarter. However, the REIT still trades at an attractive annual dividend yield of 5.87%. In addition, many analysts covering the company believe that trading at a price to funds from operations (P/FFO) multiple of 6.45, Uniti Group Inc.’s (NASDAQ:UNIT) stock is extremely cheap, and it is significantly underpriced compared to the value of the asset the company owns.
6. Switch, Inc. (NYSE:SWCH)
Elliott Management’s Stake Value: $193,798,000
Percentage of Elliott Management’s 13F Portfolio: 2.23%
Number of Hedge Fund Holders: 31
Elliott Management acquired a stake in Switch, Inc. (NYSE:SWCH) in 2021 and, through the various funds that the firm operates, became the largest owner of class A stock of Switch, Inc. (NYSE:SWCH) at the end of June that year, representing an 11% interest in the company. Switch, Inc. (NYSE:SWCH) has multiple classes of shares with different voting rights. Within a few months of Elliott Management acquiring a stake, Switch, Inc. (NYSE:SWCH) revealed that it was considering changing its status from a company to a REIT, a proposition that its shareholders approved in November 2021.
In May this year, Bloomberg reported that Brookfield Asset Management was in talks with Switch, Inc. (NYSE:SWCH) to acquire the latter. However, Brookfield’s bid was thwarted by DigitalBridge Group, Inc. (NYSE:DBRG). On May 11, Switch, Inc. (NYSE:SWCH) announced that it has entered into a definitive agreement with DigitalBridge Group, Inc. (NYSE:DBRG) and Australian infrastructure manager IFM to get acquired at $34.25 per share in an all-cash deal that valued the company at around $11 billion.
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Disclosure: None. Paul Singer’s Latest Portfolio: Top 10 Stock Picks is originally published on Insider Monkey.
