Elliott Management Talks Activism, Korea, and Favorite Stocks

Elliott Management was founded by Paul Singer and it is based out of New York City. The firm’s flagship fund Elliott Associates has offered compounded annual return of 13.5% since its inception in 1977. The fund is highly diversified and engages in activism oriented investment.

In an interview with Barron’s, Jon Pollock, the co-CEO and an equity partner of Elliott Management discussed several stocks. According to Pollock, Dell Technologies Inc. (NYSE:DVMT), Encana Corporation (NYSE:ECA) and Allergan plc Ordinary shares (NYSE:AGN) stocks have considerable upside potential as these stocks are trading at discounts vis-à-vis their peers. The co-CEO also discussed the future potential of Citrix Systems Inc. (NASDAQ:CTXS) and Hess Corp (NYSE:HES). He discussed activism and stated that the fund tries to find core issues to accelerate the returns from investments. Pollock also stated that Korean stocks tend to be undervalued on account of less than stellar governance.

An everyday investor doesn’t have the same resources and capabilities to analyze different publicly-traded companies as hedge funds do. This is why it is a good idea to see what stocks hedge funds like the most and try to imitate some of their bullish moves in an attempt to reap market-beating returns. At Insider Monkey, we follow the activity of several hundred of the best-performing hedge funds as part of our strategy. We analyze their 13F filings and use the data to see what stocks they are collectively bullish on. Through extensive research we have determined that the best approach to outperform the broader indices is to follow hedge funds into their top small-cap ideas. In our backtests, a portfolio of the 15 most popular small-cap stocks generated monthly alpha of 81 basis points, versus 0.7 percentage points posted by hedge funds’ top large- and mega-cap picks (see more details).

Dell Technologies Inc. (NYSE:DVMT) stock has lost 0.9% so far this year. At the end of June, Elliott Associates held 42 million shares of Dell Technologies worth $1.14 billion. The fund’s co-CEO stated that Dell Technologies is a VMware-tracking stock. It was issued pursuant to Dell’s acquisition of EMC. The stock’s current market price put it at nearly 37% discount to VMware common stock, showing substantial upside for the stock. According to Pollock, owning the tracking stock allows for owning VMware stock at considerable discount.

Citrix Systems Inc. (NASDAQ:CTXS)’s stock has advanced by over 12% year-to-date. Elliott Associates reported holding a stake worth $537 million, which contained 6.7 million shares of the company, as of the end of June. Among the funds we track, 45 funds held $1.36 billion worth of  Citrix Systems’ stock in aggregate at the end of June, having amassed 11% of its outstanding stock. Pollock stated that the fund has a seat on Citrix Systems’s board and the fund is bullish on the company as its new CEO has streamlined the company to focus on its core areas. Citrix’s profit margin has also improved significantly. The company stock is also likely to benefit from upcoming spinning off of its GoTo suite of products. These products will be merged with a publicly listed entity.

Shares of Encana Corporation (NYSE:ECA) have surged by nearly 100% so far in 2016 and the number of funds from our database long the stock declined by two to 26 in the second quarter ending June. Elliott Associates’ co-CEO said that the stock potentially has 50 to 60% upside left. Encana CEO Doug Suttles is credited for transforming the structure of the company. The company recently issued new stock and it trades at discount to the sum-of -parts valuation. Encana Corporation has over 10,000 identified drill locations which may provide 35% after-tax returns. The company’s relatively conservative forecast doubled the corporate margin, signaling bright future ahead. Elliott has not disclosed holding shares of Encana.

In Hess Corp (NYSE:HES), Elliott held 18.8 million shares worth $1.12 billion at the end of June. Overall, 37 funds tracked by us held positions in Hess Corp worth around $1.87 billion in aggregate at the end of the second quarter, having amassed about 9.90% of the company’s outstanding stock. Pollock said that Hess Corporation holds assets which have longer lead time and this pattern leads to cash-flow outspend. However, from 2017 onwards, the assets are likely to turn into producers of cash than consumers. Pollock also stated that Hess Corp (NYSE:HES)’s position in the Bakken and its offshore assets are expected to benefit its performance and stock price.

For learning more about energy stocks, read our article on five energy stocks to invest in.

Allergan plc Ordinary shares (NYSE:AGN) stock is down by 37% so far this year. Heading into the third quarter, Elliott held 2.73 million shares of Allergan worth $632 million, being one of the 131 funds from our database that held shares at the end of June, down from 170 funds a quarter earlier. In the interview, Pollock pointed out that Elliott has held shares of Allergan since 2015. He added that the company recently sold its generic pharma business to Teva Pharmaceuticals. Net its cash position, the company’s stock trades at considerable discount to its peers, Pollock considers. The company also has strong portfolio of aesthetic products, giving the company a strong position in the market segment which is not highly regulated. Moreover, Allergan may also use its substantial cash pile to buyback its stock or for paying dividend.

Disclosure: none