While 2016 hasn’t been a banner year for many hedge funds, for billionaire activist investor Paul Singer it is proving to be one of the most rewarding years he has seen in his four-decade-long career as a fund manager. Earlier this year, his hedge fund Elliott Management collected a massive payday after years of litigation when the Argentinean government finally settled its 15-year-old bond payment tussle with the fund. More recently, Mr. Singer was the recipient of Institutional Investor’s 2016 Manager Lifetime Achievement Award. These milestones could be why Elliott Management seems to be more optimistic about the future than other hedge funds, many of whom reduced their exposure to U.S equities going into the second quarter. According to the fund’s latest 13F filing, the value of Elliott’s U.S equity portfolio swelled to $9.52 billion at the end of March, from $8.27 billion at the end of 2015. The filing also revealed that Elliott’s U.S equity portfolio saw a quarterly turnover rate of 71.43% during the first quarter and that its top-10 equity holdings amassed nearly 62% of the value of the fund’s portfolio as of March 31. Considering Elliott Management appears to be more bullish on U.S equities than many of its peers, we will take a look at the two largest stakes that it initiated during the first quarter and discuss its top three equity holdings going into the second quarter.
We track prominent investors and hedge funds 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 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
Pfizer Inc. (NYSE:PFE)
– Shares Owned by Elliott Management (as of March 31): 3.93 million
– Value of Holding (as of March 31): $116.35 million
Regardless of whatever average price Elliott Management initiated its stake in Pfizer Inc. (NYSE:PFE) at during the first quarter, it has made a nice profit on the transaction thus far, of anywhere from 5%-to-20%. Shares of Pfizer have been on fire in the second quarter following the announcement of the termination of its merger with Allergan plc Ordinary Shares (NYSE:AGN) in early-April. The termination of the merger hasn’t stopped Pfizer Inc. (NYSE:PFE) from looking elsewhere for M&A deals. On May 16, the company announced that it has agreed to acquire California-based Anacor Pharmaceuticals (NASDAQ:ANAC) for $99.25 per share, or $5.2 billion net of cash. Anacor Pharmaceuticals is the exclusive distributor of PharmaDerm’s Kerydin topical solution in the U.S. Hedge funds that reduced their stake in Pfizer Inc. during the first quarter included Kahn Brothers, which lowered its holding in the company by 9% to 1.44 million shares.
Qlik Technologies Inc (NASDAQ:QLIK)
– Shares Owned by Elliott Management (as of March 31): 4.63 million
– Value of Holding (as of March 31): $134.04 million
Qlik Technologies Inc (NASDAQ:QLIK) was the largest stake opened by Elliott Management during the first quarter, amassing 1.41% of the value of the fund’s portfolio at the end of the quarter. After initiating its stake in the company in March, Elliott Management claimed that it is undervalued and stated that there were “strategic and operational opportunities” for it to increase shareholder value. Within a few weeks of Elliott Management’s comments, the company revealed that it is working with Morgan Stanley to find potential buyers and that it has already received preliminary purchase offers from private equity firms Thoma Bravo, Bain Capital, and Permira. On May 5, analysts at Jefferies Group reiterated their ‘Buy’ rating and $38 price target on the stock. Isaac Corre‘s Governors Lane also initiated a stake in the company during the first quarter, purchasing 157,000 Qlik Technologies Inc (NASDAQ:QLIK) shares.
We’ll run through Elliott’s top three holdings on the next page.