Billionaire Paul Singer’s Elliott Management Likes NetApp Inc. (NTAP) & Dell Inc. (DELL)

Insider Monkey tracks quarterly 13F filings from hundreds of hedge funds, including billionaire Paul Singer’s Elliott Management. We’ve developed a portfolio based on our research on 13Fs (which concluded that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year) and this portfolio earned an excess return of 33 percentage points in the last 11 months (learn more about our small cap strategy). Of course it can also be useful to treat 13Fs as sources of initial investment ideas, performing further research on any names which seem interesting. Read on for our thoughts on three things we noticed in the filing for the end of June or compare Singer’s picks to those in previous filings.

NetApp. Elliott had owned 1.2 million shares of NetApp Inc. (NASDAQ:NTAP) at the end of March, and over the next three months increased their stake to about 15 million shares. The $15 billion market cap company, which specializes in network data storage and management, had its fiscal year end in April. During its fiscal Q4, revenue and earnings each showed little change versus a year earlier. However, Wall Street analysts are predicting substantial improvements on the bottom line next year and given their expected increase in EPS the forward P/E is only 13. Billionaire George Soros’s Soros Fund Management had reported a position of 3.6 million shares of NetApp Inc. (NASDAQ:NTAP) during the first quarter of 2013 (check out more stocks Soros owned).

Paul Singer ELLIOTT MANAGEMENTMerger arbitrage. Singer and his team increased the size of their position in Dell Inc. (NASDAQ:DELL) to make it their sixth largest holding by market value, and bought 2.3 million shares of pork producer Smithfield Foods, Inc. (NYSE:SFD). Each of these companies is currently a merger arbitrage situation. Dell Inc. (NASDAQ:DELL), of course, has had billionaire activist Carl Icahn successfully push founder Michael Dell and his private equity backers to increase their offering price. Icahn continues to believe that the proposed transaction undervalues the stock, but Dell has changed its voting procedures in a manner which makes it very likely the deal will be approved by shareholders. As such it seems to be a standard merger arbitrage play at this point.

The fun at Smithfield Foods, Inc. (NYSE:SFD), however, is only just beginning. Chinese pork producer Shuanghui has offered $34 per share for the company; the current price is about $33.50. As might be imagined, the potential purchase by a Chinese company has the potential to be politically controversial in the United States. In addition, activist fund Starboard Value has argued that Smithfield could be worth more in a breakup situation and is reportedly speaking with other meat companies who may be interested in portions of the business in order to potentially offer a better deal.

Selling Delphi. Between April and June, the fund sold a significant portion of its shares in Delphi Automotive PLC (NYSE:DLPH), an auto parts company which has been somewhat popular among many hedge funds. Delphi, which focuses on electrical, electronic, and powertrain components, grew its revenue by 6% last quarter compared to the second quarter of 2012 with profits up a little over 10%. The stock has risen close to 90% in the last year, which has brought its trailing earnings multiple up to 16; however, Wall Street analysts consider it undervalued as shown by the stock’s forward P/E of 11 and its five-year PEG ratio of 0.8.

We would hesitate to be too optimistic about Starboard’s efforts at Smithfield- thus far the fund appears to have been spinning its wheels, and investors would be taking the small but still existent risk of Shuanghui’s offer being struck down as well- but given the interest in food stocks this year Smithfield seems to be worth following and certainly Elliott’s interest is worth noting. NetApp Inc. (NASDAQ:NTAP) doesn’t look too attractive at this point given how dependent the company is on hitting analyst earnings targets for next year to justify its current valuation. As for Delphi Automotive PLC (NYSE:DLPH), taking some profits on the stock seems wise but we can understand why Singer and his team kept it in their portfolio given its decent performance according to recent reports.

Disclosure: I own no shares of any stocks mentioned in this article.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!