Paul Singer’s Elliott Management is bullish regarding Hess Corp. (NYSE:HES) and Anadarko Petroleum Corporation (NYSE:APC), as revealed by the fund’s large holdings in the two companies. On the other hand, the hedge fund has taken a bearish stance towards Chevron Corporation (NYSE:CVX), Noble Energy, Inc. (NYSE:NBL), Exxon Mobil Corporation (NYSE:XOM), and ConocoPhillips (NYSE:COP). We know this because the investment firm has taken on put positions in these stocks, using them to hedge the risk in energy stocks.
Elliott Management (Stock Picks, Investor Letters) is a New York City-based hedge fund that was founded by Paul Singer in 1977. The firm has been operating successfully for almost four decades and has been under Mr. Singer’s continuous management since it was launched. Elliott Management, along with Elliott International, are part of a larger entity called Elliott Management Corporation, which has around $15 billion in assets under management and caters to a wide range of institutional and wealthy investors. According to its latest 13F filing, Mr. Singer’s fund has an equity portfolio valued at $9.59 billion, with around 36% of its holdings represented by companies from the energy sector. In his 2014 Q4 investor letter, Singer made the following comments about the oil markets:
“The shortfall in demand which caused this crash is actually not all that great, and economic conditions around the world are not really that bad, and so some high-cost producers and their investors think that they can wait this out. However, since this is largely an engineered price move, we believe that over a period of coming weeks and months an increasing number of leveraged, high-cost producers will shut down production and/or file for bankruptcy. Bank lenders will get nervous and then harsh. Saudi Arabia’s strategy is incredibly effective in keeping this kind of competitor off balance.”
“…The price plunge is new, but if it is not reversed relatively quickly, it could make the apparently strong economic numbers in the U.S. in recent months seem like a lost warm memory by the middle of 2015. The problem, of course, is that the absence of pro-growth economic policies in the developed world (aside from monetary extremism) places a large premium on any industry that is actually growing and providing jobs and GDP. Given the fragility of both the global financial system and the economy, the plummet in the oil price is coming into a world in which any disruption can be harmful, even one resulting from a fall in prices of a major global input into the economic engine. The rise in the U.S. dollar in recent months also operates in the same direction, serving as another growth-dampening force to offset the consumer benefit of reduced-cost gasoline. Most people think the “tax cut” is more important overall than the growth-suppressive effects of the harm to the energy industry and the rise in the dollar, but we disagree.”
