Billionaire Paul Singer’s Long-Term Picks

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Elliott Management is not only one of the most well known hedge funds, but also one of the oldest hedge funds under continuous management. Founded by billionaire Paul Singer in 1977, with $1.3 million borrowed from friends and family members, the fund currently manages $27 billion of investors’ money. Though Mr. Singer is considered an activist investor, he also has routinely made large bets on sovereign debt, which has gained him some notoriety in emerging countries. Due to losses suffered early in his career, Mr. Singer’s investment style is considerably risk-averse when compared to other prominent investors. He is known for rarely using leverage to boost the overall return of his fund. This risk aversion has paid off handsomely with Elliott Management reporting only two down years in the last 38 years of its existence and generating average annual returns of 14.7% in the period between 1977 to 2008 compared to S&P 500’s returns of 10.8%.

According to Elliott Management’s latest 13F filing, the firm’s US equity portfolio at the end of September was worth $5.2 billion and a large chunk of it (38%) consisted of stocks from the technology sector. The filing also revealed that Elliott’s portfolio had a high turnover of 47.69% during the third quarter and that its top 10 equity holdings at the end of September accounted for over 70% of the value of its equity portfolio.  In our previous post on Elliott Management we went through the fund’s five largest equity holding going into the fourth quarter and in this article we will be analyzing  five stocks that Elliott Management has held for a long time – hence displaying its conviction on them- and figure out what makes the fund still bet on them.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas (see more details here).

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#5 FCB Financial Holdings Inc (NYSE:FCB)

– Shares Owned by Elliott Management (as of September 30): 2.18 Million

– Value of Holding (as of September 30): $71.18 Million

FCB Financial Holdings Inc (NYSE:FCB) is one of the few financial sector stock that had a phenomenal run in 2015, up by over 45%. Elliott Management initiated a stake in the company soon after its IPO in the third quarter of 2014 and solidified it in the fourth quarter of 2014 by increasing its holding to over 2.5 million shares. Although the fund reduced its stake in the company by 9% and 8% during the second and third quarter of 2015, respectively, it might be for profit-booking purposes as the stock of FCB Financial Holdings Inc (NYSE:FCB) is up by almost 60% from its IPO. On January 5, the company said that it will report its fourth-quarter earnings on January 25. Analysts expect it to report EPS of $0.50 on revenue of $65.48 million, compared to EPS of $0.30 on revenue of $61.8 million that it reported for the same quarter last year.

On January 7, analysts at Gabelli initiated coverage on FCB Financial Holdings’s stock with a ‘Buy’ rating and $39 price target. The phenomenal run of FCB Financial Holdings’ stock has  made it very popular among hedge funds. During the third quarter the ownership of the company among funds covered by Insider Monkey rose by over 45% to 22 funds. Among the funds that has increasingly become bullish on the company is billionaire Jim Simons‘ Renaissance Technologies, which more than doubled its stake in FCB Financial Holdings to 357,100 shares during the July-September period.

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