If one were to come up with a list of the most successful activist investors in the world, Paul Singer‘s name would surely have a hallowed place very close to the top of that list. The billionaire’s hedge fund Elliott Management has lost money in just 2 years since its inception in 1977 and currently manages about $30 billion of investor money. In one of his most challenging endeavors, Singer was able to finally end his 15-year battle with the Argentinean government earlier this year concerning that country’s debt default, scoring a $2.4 billion payday for his fund.
However, not everything Singer touches turns into piles of cash. Our analysis of Elliott Management’s portfolio holdings shows that between 1999 and 2012, an equal-weighted portfolio of the fund’s large-cap stock picks lost 0.38% per month, while the S&P 500 gained 0.20% per month during that time. Needless to say, that’s some extreme underperformance, which tells us that Elliott Management is much more adept at investing in and guiding smaller companies than it is at finding good investments among large-caps.
With that in mind, we’ll take a look at the billionaire’s investments in large-caps Apple Inc. (NASDAQ:AAPL), Allergan plc Ordinary Shares (NYSE:AGN), International Business Machines Corp. (NYSE:IBM), Marathon Petroleum Corp (NYSE:MPC), and QUALCOMM, Inc. (NASDAQ:QCOM) in this article.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Apple Inc. (NASDAQ:AAPL)
– Shares Covered by Put Options Owned by Elliott Management (as of September 30): 1.16 Million
– Value of Elliott Management’s Holding (as of September 30): $130.97 Million
We’ll start with Apple, which Singer continues to bet against. In fact, Elliott Management hiked its position of put options underlying Apple shares by 60% in the third quarter, with the fund now betting against 1.16 million of the company’s shares. The holding, which was initiated during the second quarter of this year, has yet to pay off for the fund, as Apple shares are as high as they were at any point during the middle two quarters of this year.
Apple Inc. (NASDAQ:AAPL) is in the process of fighting its $13.6 billion EU tax bill, which could last years and will force the company to hold the contested funds in escrow. The EU contends that Apple received unfair deals from Ireland, which the country itself denies and is also appealing. Apple contends that it was taxed according to decades-old tax laws and did not receive special treatment. Apple was extremely popular among the hedge funds in our system during the third quarter, as a net total of 29 funds added the stock to their portfolios, pushing the overall total to 145 funds with long positions.
Allergan PLC (NYSE:AGN)
– Shares Owned by Elliott Management (as of September 30): 2.74 Million
– Value of Elliott Management’s Holding (as of September 30): $629.90 Million
Elliott Management’s position in Allergan PLC (NYSE:AGN) is one of two long positions covered in this article, and therefore one of the most closely related to our backtests. The size of Elliott’s long position was unchanged at nearly 2.74 million shares, though the fund’s position of shares covered by call options was lowered by 31% to cover 2.10 million shares. Some of the call options the fund bought during the second quarter may have been successfully closed during the stock’s rally into the third quarter, though the options bought during the first quarter when it opened the position would now have a long way to go. Shares of Allergan are down by 38% this year, but have rebounded since a slump on December 7 following President-elect Trump’s declaration that he would bring down drug prices.
We’ll check out three more large-cap stocks held by Elliott Management on the next page.