In this piece, we will take a look at the top 10 stock picks of Elliott Management.
It was arguably one of the best years for hedge funds, going by the $67 billion returned to shareholders in 2023 as the overall equity markets shrugged off high interest rates to finish on a high. Elliott Management was one of the hedge funds that were up 4.7% for the year, slightly down from the 5.9% gain in 2022.
Founded in 1977, Elliott Management is one of the oldest and most successful hedge funds often tracked on Wall Street for investment opportunities. The hedge fund has only lost money in two years since its inception, affirming its impressive track record of focusing on underperforming and distressed companies.
Billionaire investor Paul Singer is the brainchild behind the highly diversified hedge fund that returned $5.5 billion to investors last year, taking its net gains since its inception to $47.6 billion. Additionally, the hedge fund manager boasts an average annual return of 14%, underscoring why he is one of the respected voices on Wall Street.
Elliott Management has two main funds, Elliott Associates L.P. and Elliott International Limited in which it leverages various strategies to generate value in the market. In the first quarter, Elliott Associates L.P generated a return of 2.5% and boasts of a 12-month return of 8.5% and two year compounded annual return of 5.5% on the other and Elliott International Limited was up by 2.4% in Q1 and 7.9% return in the past 12 months adding to compounded annual rate of return of 4.9%.
Since its inception, Elliott Management has invested in distressed securities. Initially, it operated as a hedge fund focusing on convertible arbitrage, but over time, it shifted its attention to investing in companies and, eventually, countries experiencing economic difficulties.
In the 1990s, it acquired distressed debt from nations like Peru and Argentina, which resulted in significant repayments of multi-million dollars. These strategies, which occasionally involved investments in corporate debt, led to Paul Singer being dubbed the “doomsday investor” by The New Yorker magazine in 2018.
More recently, in March 2021, amidst the turmoil in the nickel market following the conflict between Ukraine and Russia, the activist fund sought over $450 million in compensation from the London Metal Exchange for employing an illegal tactic aimed at disrupting trade.
Singer stands out from other hedge fund managers in his ability to identify high-risk reward opportunities and never shy away from taking risks. He accurately predicted the 2008 financial crisis and went on to benefit from it through aggressive investment strategies.
Likewise, Elliott Management showed no signs of slowing down in the first quarter of 2024. Singer and other investment managers have perfected the art of investing in underperforming companies and pursuing strategic changes to unlock optimum value.
Consequently, Elliot Management is one of the most revered activist hedge funds known to exert maximum pressure on companies it gets involved in to turn around their fortunes. In its activist campaigns, the hedge fund is known to push for management changes and board seats, all to influence strategic direction aimed at unlocking value. In aggressive situations, the firm can advocate for a spinoff of some assets or the sale of the entire business. Last year alone, the firm launched 15 activist campaigns.
Paul Singer of Elliott Management
Elliott Management boasts of one of the most diversified investment portfolios worth $16.12 billion. Nevertheless, the hedge fund is heavily invested in the Basic Materials sector, which accounts for 36.9% of its portfolio, with other best standing at 50.5%
The activist hedge fund has also been active in the capital markets, raising $8.5 billion in the first quarter after initially targeting $7 billion. The capital raise comes as it gears up for what it terms as a potential market downturn given the inexorable levitation” of the markets. The hedge fund has raised concerns over the premium valuations most equities and bonds enjoy that have come at the back of record interest rates.
The firm argues that the Federal Reserve lacks a deeper understanding of inflation and market fragility than the general public and that the presence of concentrated passive investors, elevated levels of government debt, and the possibility of currency depreciation all indicate a bubble situation.
Additionally, the hedge fund believes there are glimpses of bubbles in the market going to the frenzy triggered by the artificial intelligence revolution. Singer has warned of an ugly end to the Federal Reserve’s easy money policies for the longest time, insisting on trouble ahead due to high valuation and too much leverage.
Our Methodology
Elliott Management generated a gain of 12.6% in the first quarter underlines the effectiveness of its strategy of investing in companies with robust growth metrics and long-term prospects. After analyzing the 13F filing, we have settled on the top 10 holdings of Elliott Management. The stocks are ranked based on the hedge fund’s stake in them.
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).
Top Stock Picks of Elliott Management
10. Etsy, Inc. (NASDAQ:ETSY)
Elliott Management’s Stake Value: $154.62 Million
Number of Hedge Fund Holders: 35
Etsy Inc (NASDAQ:ETSY) is one of the top 10 stock picks of Elliott Management. The hedge fund has built a 13% position in the e-commerce company. Together with its subsidiaries, Etsy Inc (NASDAQ:ETSY) operates two-sided online marketplaces that connect buyers and sellers in the US.
While Etsy Inc (NASDAQ:ETSY) has been under pressure over the past two years, going down 21% in 2024, Elliott Management managing partner Jesse Cohn believes the company has the potential to generate significant multiyear upside. Cohn believes Etsy Inc (NASDAQ:ETSY) can add more buyers and increase their spending on the platform.
In the first quarter, Etsy Inc (NASDAQ:ETSY) recorded a 2% increase in active buyers, but gross merchandise sales across marketplaces fell to $2.99 billion from $3.10 billion a year ago. A total of 35 hedge funds tracked by the Insider Money database held stakes in the company as of Q1 2024.
9. Cardinal Health Inc (NYSE:CAH)
Elliott Management’s Stake Value: $223.80 Million
Number of Hedge Fund Holders: 45
Cardinal Health Inc (NYSE:CAH) is one of Elliott Management’s top 10 holdings in the healthcare sector that provides customized solutions for hospitals, healthcare systems, pharmacies, and clinical laboratories. After delivering mixed first-quarter results, Cardinal Health Inc (NYSE:CAH) has been under pressure recently.
Its first-quarter net income fell to $258 million from $345 million a year ago, even as revenues increased 9% yearly to $54.9 billion. Likewise, Cardinal Health Inc (NYSE:CAH) has been up by about 4% in the year to date.
In addition, Cardinal Health Inc (NYSE:CAH) has increased dividends for 37 consecutive years. We recently released a list of the Top Dividend Stocks to Buy in 2024; according to Billionaire Paul Tudor Jones, Cardinal Health Inc (NYSE:CAH) secured the 2nd spot on this list. As of the end of the first quarter of 2024, 45 hedge funds were tracked by the Insider Monkey database.