Billionaire Paul Singer’s Top Stock Picks: BMC Software, Compuware, Melco Crown

ELLIOTT MANAGEMENTPaul Singer founded Elliott Associates in 1977. Now, combined with Elliott International under the Elliott Management banner, the fund has about $15 billion under management and using a number of strategies and asset types in its investment process; it is particularly noted for debt investing and taking activist minority stakes. Only some of these assets show up in 13F filings, but what we do see should allow us to identify some themes in Singer’s investing strategy. Here are some trends we see in the fund’s new 13F compared to previous filings:

Enterprise software. The fund added heavily to its positions in BMC Software Inc (NASDAQ:BMC) and Compuware Corporation (NASDAQ:CPWR). The BMC position rose 8.3 million shares to 10.4 million, and the 4.7 million shares of Compuware in Elliott’s portfolio grew to 8.6 million. BMC is expected to achieve good growth by the Street, as it trades at 19 times trailing earnings but only 11 times forward earnings estimates. So far this year the stock is up 25%. Compuware is priced a little higher relative to its business prospects, at a forward P/E of 18. While both stocks reported large decreases in earnings last quarter compared to the same period the previous year- 44% for BMC and 38% for Compuware- Singer and his team believe that something about the companies’ product offerings makes them attractive investments, and so investors should consider looking deeper at the companies to see if they can deliver on the required growth.

Delphi. The fund cut back on it stake in Delphi Automotive (NYSE:DLPH), but at 34.5 million shares it remained the largest position reported on the 13F at nearly twice the size of the second largest holding, so we would say that it still qualifies as a major investment theme for Elliott. Delphi provides a number of auto parts such as electrical, safety, and heating and cooling components. The sluggish auto market has kept Delphi’s valuation fairly low relative to its current operations as investors remain skeptical that the company can grow (similar concerns are plaguing automakers such as Ford and GM). Delphi trades at eight times trailing earnings, seven times forward earnings estimates, and a PEG ratio of 0.5; on a quantitative basis it makes for a good value stock. Delphi was also a favorite stock of John Paulson’s in the first quarter of 2012.

Melco Crown. Melco Crown Entertainment (NASDAQ:MPEL) owns and operates casino resorts primarily in Macau. In its most recent quarter the company reported revenue that was slightly down from the same quarter in 2011 but earnings which were up by 23%. The stock is highly exposed to the broader market (beta of 2.3), as the strength of the U.S. economy has a magnified effect on the Chinese economy which in turn drives Macau gambling revenue.  Both its trailing and forward P/E multiples are 14, but sell-side analysts tag it as a good long-term stock with a five-year PEG ratio of 0.5.  It also might make a good pair trade with other casino companies.    Bain Capital’s Brookside Capital was also an investor in the stock in the first quarter. At the end of April Elliott had owned 4.4 million shares and the fund increased this stake to 7.2 million shares by the end of June.

As far as Delphi goes, we think there are good value plays in the auto business but that automakers such as Ford and GM might carry better values than Delphi at this point. There is a good case for casinos as a growth industry but we worry about a number of factors including questionable U.S. (and Chinese) macro as well as competition from other casinos. However, since the competition factor in particular is likely to increase in the U.S. as gambling regulations are weakened, Melco Crown could work well if paired with short positions in highly leveraged domestic destination casinos. The intricacies of various enterprise software products aren’t something we are an expert on, but later this month we will try to dig deeper into the companies that Elliott thinks are such a good buy, and we’d suggest that investors do the same.

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 Jobs that May Exist in the Future

The Absolute Best States to Shop in the US

5 Best States for Golf Adventures

Top 15 Places To Visit Before You Die

10 Most Expensive Smartphones in the World

10 States with Lowest Physician Density

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

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!