Billionaire Paul Singer’s hedge fund, Elliot Associates, has a strategy of buying distressed securities cheaply, and sell them later at a higher price. Last year, the fund posted a return of 13% on its holdings. Elliot has $21 billion assets under management. As per its recent 13F filings with the SEC on March 31, 2013, it disclosed four new positions and 13 exits.
In this article, I have analyzed top three holdings of Elliot Associates. These holdings constitute 58% of its portfolio. Let’s see what potential investment opportunities are available in Elliot’s top three holdings.
|Delphi Automotive PLC (NYSE:DLPH)||21.12%|
|Hess Corp. (NYSE:HES)||23.33%|
|BMC Software, Inc. (NASDAQ:BMC)||13.78%|
Acquisition strengthens company’s segment
China is the world’s largest automobile market. Recently, stringent automotive emission standards were introduced in China to reduce carbon emissions, maintain air quality, and high oil prices. Taking advantage of this opportunity, Delphi Automotive PLC (NYSE:DLPH) has expanded its “Powertrain Systems” which consists of gasoline engine management systems. This expansion will help local Delphi Automotive PLC (NYSE:DLPH) customers meet the tough “China V” emission standards.
Since expansion, the company has supported more than 50 Chinese original equipment manufacturers with development and supply of gasoline engine management systems. Not only does Delphi Automotive PLC (NYSE:DLPH) support Chinese customers, but it has also strengthened its position in engine management systems. With this expansion, the expected revenue of “Powertrain Systems” for this year is $4.81 billion and $5.3 billion next year.
In 2012, Delphi Automotive PLC (NYSE:DLPH) acquired FCI Group’s motorized vehicles division, a leading global manufacturer of connector and electronic content in motor vehicles. This acquisition has strengthened Delphi’s position as a leading global manufacturer in the connector industry and the electrical/electronic architecture industry. This segment offers designs for vehicles’ electronic architecture, connectors, safety distribution systems, and hybrid high voltage systems. After the acquisition, the company’s electrical/electronic architecture segment reported revenue of $1.92 billion, up 11% year-over-year, in the first quarter of this year. Expected revenue in the fourth quarter of this year is $2 billion.
Opportunity to become a private company
BMC Software, Inc. (NASDAQ:BMC) is a leading company in innovative IT solutions and business services. It has also set a benchmark in growing segments like cloud management, workload, and service management. Because of its capabilities, it has become a target for acquisition by investors. The company recently announced its intent to be acquired by a private equity group led by Bain Capital.
With the execution of this deal, BMC Software, Inc. (NASDAQ:BMC) has the opportunity to become a private company. By going private, the company will have the additional advantage of investing strategically to develop innovative products and to deliver the latest advanced solutions to its customers. The group of investors will buy BMC Software, Inc. (NASDAQ:BMC)’s outstanding common stock for approximately $6.9 billion, or $46.25 per share. The deal is expected to close in August.
On the other side, the demand for BMC Software, Inc. (NASDAQ:BMC)’s ‘MyIT’ has increased since its launch in October 2012. A beta version was launched in January 2013, and was commercialized starting in April 2013. MyIT is an application that allows IT departments to offer employees personalized access and control over IT services and information “anytime, anywhere, and from any device.” This application reduces IT cost up to 25% depending on the company’s size and resolves around 90% of IT issues, saving time and resources.