Billionaire Activist Paul Singer’s Stock Picks Deliver Solid Q1

Paul Singer is renowned for refusing to settle claims concerning the $1 billion that his Elliott Management is owed by the Argentinian government. He is also known for leveraging his $27 billion fund for activist campaigns against companies that he seeks to shake up and improve the operations of, thereby creating more shareholder value. In order to gauge how the activist firm’s stock picks performed in the first quarter, we did an analysis of the weighted average returns of Elliott Management’s equity picks which have a market cap of at least $1 billion. By this yardstick, a total of 42 holdings returned about 2.3% in the first three months of the year, outperforming the market. With that in mind, we’ll take a closer look at some of the fund’s top equity positions in this article and see how those stocks performed in the first quarter.

Our research determined that following the small-cap stocks, that hedge funds are collectively bullish on, can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

#5 Cabelas Inc (NYSE:CAB)

 – Shares Owned by Elliott Management (as of December 31): 4.17 Million

 – Value of Holding (as of December 31): $194.63 Million

According to a 13D filing in February, Elliott further hiked its stake in the $3.3 billion retailer of hunting, fishing, camping and related outdoor merchandise to 6.05 million shares, along with additional exposure to 1.61 million shares through derivative agreements. What makes Cabelas Inc (NYSE:CAB) an alluring target for Elliott is the retailer’s healthy real estate portfolio, as it owns most of its stores. These could be sold for a quick injection of cash that could be used for growth initiatives, returned to shareholders, or a combination of both. The company recently announced that its Variable funding facility with Bank of America has been extended through March 2019 and was also increased to $500 million from $300 million. In its financial results for the fourth quarter, Cabelas managed to beat both the top and bottom-line estimates of analysts, which has contributed to its shares climbing by nearly 6% in the first quarter. Like Elliott Management, which initiated its stake in Cabelas during the fourth quarter, Richard Barrera‘s Roystone Capital Partners also initiated a stake in Cabelas Inc (NYSE:CAB) during the quarter, of 1.46 million shares.

#4 CDK Global Inc (NASDAQ:CDK)

 – Shares Owned by Elliott Management (as of December 31): 8.05 Million

 – Value of Holding (as of December 31): $381.93 Million

Elliott Management’s CDK Global Inc (NASDAQ:CDK) holding represented about 5% of the company’s outstanding stock as of December 31 and that stock dipped by over 2% during the first quarter. News that Elliott Management was seeking to take the $7.38 billion automotive software provider private in a leveraged buyout deal, surfaced last September. However, as nothing has been resolved on that front, the fund might be hoping that another private equity firm does the job instead, similar to what happened with Riverbed Technology in 2014. CDK beat both the top and bottom-line estimates with its financial results for the second quarter of fiscal year 2016, ending December 31. John Griffin‘s Blue Ridge Capital held about 6.15 million shares of CDK Global Inc (NASDAQ:CDK) at December’s end.

We study three more top stock picks of the activist investment firm on the next page.

#3 Citrix Systems, Inc. (NASDAQ:CTXS)

 – Shares Owned by Elliott Management (as of December 31): 6.71 Million

 – Value of Holding (as of December 31): $507.35 Million

Elliott hiked its Citrix Systems, Inc. (NASDAQ:CTXS) holding by 14% during the fourth quarter, lifting the value of the holding to over $500 million. It has grown even greater since then, as the stock price of the market technology solutions designer and marketer advanced by 5.14% during the first quarter. Elliott has been working with Citrix Systems’ management since its activist campaign began last June, when it hired two investment banks to conduct due diligence on the company. Citrix not only beat top and bottom-line estimates with its fourth quarter financial results, but its guidance for the first quarter was also better than the consensus. AQR Capital Management, led by Cliff Asness, held about 1.86 million shares of Citrix Systems, Inc. (NASDAQ:CTXS) at the end of last year.

#2 Alcoa Inc (NYSE:AA)

 – Shares Owned by Elliott Management (as of December 31): 67.1 Million

 – Value of Holding (as of December 31): $662.27 Million

Elliott’s new Alcoa stake rose by more than 2% during the January-to-March period. Furthermore, the fund lifted its Alcoa Inc (NYSE:AA) holding to 7.4% of the company’s outstanding shares earlier this year, from 5.1% held at the end of December. Elliott immediately received representation on the company’s Board after the fund expressed its desire to help management work on splitting the company into two, given rock bottom aluminium prices, which are trading at nearly six-year lows. Although Alcoa managed to beat the bottom-line estimates in its first quarter financial results, it lagged behind expectations when it came to its top-line results. Moreover, Alcoa cut its outlook for the aerospace market and now expects growth to come in between 6% and 8%, compared to the 8%-to-9% range provided prevously. Steve Cohen’s Point72 Asia (Singapore) held about 2.63 million shares of Alcoa Inc (NYSE:AA) at the end of December.

#1 EMC Corporation (NYSE:EMC)

 – Shares Owned by Elliott Management (as of December 31): 42.23 Million

 – Value of Holding (as of December 31): $1.08 Billion

Elliott had been campaigning for a breakup of EMC Corporation (NYSE:EMC) since 2014, pushing the company to spin off its VMware business. A nine-month standstill agreement was reached in early 2015 that kept those discussions private, before Elliott began putting public pressure on the company again late last year. Instead, EMC and its VMware stake, which had yet to be spun-off, is set to be acquired by Dell. It has been reported that EMC is planning to raise about $6 billion by selling its Documentum business in order to lessen Dell’s debt burden when it comes to the $67 billion merger deal, of which $50 billion will be financed through debt. Billionaire Seth Klarman‘s Baupost Group held about 29.25 million shares of EMC Corporation (NYSE:EMC) at the end of last year.

Disclosure: None