In this article we present the list of Feared Activist Investor Paul Singer’s Top 10 Stocks for 2022.
Twitter, Inc. (NASDAQ:TWTR), Marathon Petroleum Corp (NYSE:MPC), and Howmet Aerospace Inc. (NYSE:HWM) are among the top stock picks of Paul Singer, one of the most feared activist investors on Wall Street.
Paul Singer’s Elliott Management is a West Palm Beach-based hedge fund with over $51 billion in assets under management as of the end of 2021. The billionaire money manager has become one of the most intimidating activists in the world, as evidenced by his past involvement with Twitter.
A lawsuit being brought against the firm by Twitter shareholders alleges that Twitter was so intimidated by Elliott Management’s arrival on the scene that it gave the fund a sweetheart deal to save itself the potential embarrassment of getting crushed under the activist’s heel. That deal included Twitter selling $1 billion in convertible bonds to Elliott ally Silver Lake Partners despite the company having billions in cash on hand. Even then, Elliott eventually executed its plan to oust CEO Jack Dorsey.
Elliott is not only one of the most feared activists, but was also the most active one last year, launching 17 new campaigns, its most since 2018. Among the firm’s notable campaigns last year were its battle with Duke Energy Corporation (NYSE:DUK) over the composition of the company’s board and its deal with Citrix Systems, Inc. (NASDAQ:CTXS) to take the company private.
Paul Singer of Elliott Management
Despite his reputation, Singer’s fund has lagged the market for much of the past several years. It returned over 13% in 2020, but that trailed the market by about five percentage points. Elliott’s annualized five-year returns through mid-2021 amounted to 9.21%, which also trailed the market substantially. Over its lengthy history however, Elliott has still delivered market beating returns, with 13.1% annualized returns since inception, 1.3 percentage points better than the S&P 500’s performance during that time.
Elliott Management’s 13F portfolio was valued at $10 billion on March 31, down from $11.3 billion as of the end of 2021. The fund sold off eight of its former holdings during the first quarter, while adding nine new positions to its portfolio. One of the most striking components of Elliott Management’s portfolio is the minimal role that tech stocks now play in it after the fund unloaded some of its biggest tech names during the prior two quarters. The fund had just 2% exposure to tech stocks on March 31, the least it’s had in the last two decades.
In this article, we’ll look at the ten stocks that Elliott Management has the most conviction as we head towards summer 2022.
Our Methodology
The following data is gathered from Elliott Management’s latest 13F filing with the SEC. We follow hedge funds like Elliott Management because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2022 reporting period.
Feared Activist Investor Paul Singer’s Top 10 Stocks for 2022
10. E2open Parent Holdings, Inc. (NYSE:ETWO)
Value of Elliott Management‘s 13F Position: $142 million
Number of Hedge Fund Shareholders (as of March 31): 29
In contrast to Twitter, Inc., Marathon Petroleum Corp, and Howmet Aerospace Inc., which are several of the well-known stocks owned by Paul Singer, E2open Parent Holdings, Inc. (NYSE:ETWO) is one of the least heralded names in his 13F portfolio. While Singer raised his stake in the company by 3% during Q1, several other money managers were selling, as hedge fund ownership of the stock fell by 28%.
A software and analytics provider for the global supply chain market, E2open Parent Holdings, Inc. earned $0.08 per share in adjusted EPS during its Q4 of FY2022, beating estimates of just $0.02. The company fell short of sales estimates however, delivering $144.2 million in revenue. On the other hand, E2open Parent Holdings, Inc.’s FY2023 revenue guidance of between $681 million and $689 million was nearly $50 million ahead of estimates on the top end.
9. Evergy, Inc. (NYSE:EVRG)
Value of Elliott Management‘s 13F Position: $153 million
Number of Hedge Fund Shareholders (as of March 31): 23
Evergy, Inc. (NYSE:EVRG) still ranks among Paul Singer’s ten favorites, though the activist unloaded 77% of his former stake in the company during Q1, ending the quarter with 2.24 million shares. Shares of the utility company were owned by 23 hedge funds on March 31, down from 40 in the middle of 2020.
Elliott Management has had an active role in guiding Evergy, Inc.’s fortunes over the last few years, pushing the company for leadership changes and to explore merger possibilities. In March 2020, the two parties reached an agreement that added two independent directors to Evergy’s board and established a committee that would seek ways to increase shareholder value.
After Evergy, Inc. failed to find a suitable buyer, the company formed a new agreement with Elliott in August 2020 that committed it to pursue greater shareholder returns and to invest heavily in its transmission and distribution infrastructure over the coming five years. The two sides reached another agreement in February 2021 that added two more directors to Evergy’s board.
8. Switch, Inc. (NYSE:SWCH)
Value of Elliott Management‘s 13F Position: $178 million
Number of Hedge Fund Shareholders (as of March 31): 14
Elliott Management’s stake of 5.79 million shares in Switch, Inc. (NYSE:SWCH) was kept intact during the first quarter. That represented the largest holding of any of the funds tracked by Insider Monkey. Steve Cohen’s Point72 Asset Management raised its stake in SWCH to 1.6 million shares by March 31, a 653% increase from a quarter earlier.
Elliott Management became the largest class A shareholder of Switch, Inc. back in August 2021, with an 11% economic interest in the company. The two companies reached an agreement later that month which saw the company add Elliott portfolio manager Jason Genrich to its board. Elliott said at the time that it believed greatly in the company’s leadership and believed the stock remained undervalued despite best-in-class performance in several key areas.
Switch, Inc. eventually looked into the possibility of a sale, which culminated in the data center company agreeing to be bought by DigitalBridge and IFM Investors in a deal worth $34.25 per share. Should the deal go through, Elliott will have gained 66% on its early-August position.
7. Uniti Group Inc. (NASDAQ:UNIT)
Value of Elliott Management‘s 13F Position: $282 million
Number of Hedge Fund Shareholders (as of March 31): 18
Paul Singer’s Elliott Management own 20.5 million shares of Uniti Group Inc. (NASDAQ:UNIT) as of March 31, the same amount the fund held on December 31. Singer has the largest position in the company among the select group of hedge funds that are tracked by Insider Monkey’s database.
Uniti Group Inc. in another infrastructure REIT that has caught the attention of Paul Singer in recent years. The company has built a sizable network of 7.5 million strand miles of fiber, the majority of which has yet to be leased. The company believes it is well positioned to capitalize on a growing market that has minimal competition.
Uniti Group Inc.’s consolidated revenue hit $278 million in Q1, $205 million of which came from its Uniti Leasing segment. Consolidated adjusted EBITDA was an impressive $225 million, with the company achieving a 97% adjusted EBITDA margin during the quarter. Uniti anticipates its adjusted funds from operations to be between $1.70 and $1.77 per share in 2022, a 4% year-over-year increase at the midpoint.
6. Suncor Energy Inc. (NYSE:SU)
Value of Elliott Management‘s 13F Position: $326 million
Number of Hedge Fund Shareholders (as of March 31): 41
Closing out the first part of the list of Paul Singer’s top 10 stocks is Suncor Energy Inc. (NYSE:SU), which he bought 10 million shares of during Q1 to build a sizable new long position in the stock. Hedge fund ownership of SU rose by 21% during the first quarter and has nearly doubled since the third quarter of 2020.
Suncor Energy Inc. announced the sale of its solar and wind assets in April in an effort to refocus on what it does best: squeeze oil out of sand. The Canadian company does have some other renewables plans, where the focus will be on renewable fuels and hydrogen. Suncor had a blowout Q1, setting its quarterly record for adjusted funds from operations at $4.1 billion. The company used the windfall to hike its dividend and spend over $1.5 billion buying back shares and paying down its debt.
The ClearBridge Investments International Growth ADR Strategy liked the price it bought SU shares at, having this to say about Suncor Energy Inc. in its Q1 2022 investor letter:
“Also within the structural bucket, we added to our commodity exposure with the purchase of Suncor Energy (NYSE:SU). Suncor, a past holding, is a Canadian integrated oil company where we capitalized on attractive valuation due to a COVID-19-induced slowdown. We expect recovery in oil demand and strong pricing will result in faster than expected free cash flow growth and financial deleveraging.
The structural bucket has the shortest investment horizon across the spectrum of growth companies we target in the Strategy. We closely monitor the macro impacts and turnaround progress of these companies and will be disciplined sellers when the thesis for a holding plays out.”
On the next page we’ll take a look at Paul Singer’s stakes in Marathon Petroleum Corp, Twitter, Inc., and Howmet Aerospace Inc..
5. Twitter, Inc. (NASDAQ:TWTR)
Value of Elliott Management‘s 13F Position: $387 million
Number of Hedge Fund Shareholders (as of March 31): 66
Kicking off the second half of this article is Twitter, Inc., which Elliott Management maintained its position in during Q1, owning an even 10 million shares at both the start and end of the first quarter. Hedge fund ownership of Twitter has slumped heavily in the last year, sliding by 39%.
However, the latest hedge fund ownership data came in just before Tesla, Inc. (NASDAQ:TSLA) CEO, technology wunderkind, and free speech advocate Elon Musk declared his substantial ownership stake in Twitter, Inc. in early April. Musk followed that up by eventually buying the social media platform outright for $44 billion in a deal that is still awaiting shareholder and regulatory approval.
It will certainly be interesting to see how Elliott reacts to Musk buying Twitter, Inc.. Elliott partnered with Egon Durban, an ally of Musk’s who heads the activist fund Silver Lake Partners, in a bid to force former Twitter CEO Jack Dorsey from his role. That initiative succeeded and Durban has remained on Twitter’s board to this day even after shareholders voted to block his re-election to the board in late May. Twitter refused to accept Durban’s resignation, vowing to checkmated shareholders that Durban would leave some of his other board positions, since that was obviously the only issue shareholders could have possibly had with him.
4. Nielsen Holdings plc (NYSE:NLSN)
Value of Elliott Management‘s 13F Position: $452 million
Number of Hedge Fund Shareholders (as of March 31): 47
There was a 74% surge in hedge fund ownership of Nielsen Holdings plc (NYSE:NLSN) during Q1 following reports in late March that the television ratings company could be taken private. Near the end of March, Nielsen did indeed agree to be taken private by an investor that included Brookfield Business Partners L.P. (NYSE:BBU) and Elliott Management affiliate Evergreen Coast Capital. For its part, Elliott Management left its stake in NLSN unchanged during Q1.
The deal will pay Nielsen Holdings plc (NYSE:NLSN) shareholders $28 per share in cash, valuing the company at $16 billion and is expected to close in the second half of this year. WindAcre Partnership, which owned nearly 10% of Nielsen at the time, was against the deal, arguing that it undervalued the company. It agreed to support the deal if it was paid $40 per share for its stake in the company, which was rejected.
Following the deal, Elliott announced that it was confident in Nielsen’s ability to remain the gold standard in measuring audience engagement across cable TV and streaming services. Nielsen Holdings plc (NYSE:NLSN) expects to grow revenue by a modest 3.5% to 4.5% in its FY2022, while adjusted earnings per share are expected to be between $1.81 and $1.91.
3. Peabody Energy Corporation (NYSE:BTU)
Value of Elliott Management‘s 13F Position: $634 million
Number of Hedge Fund Shareholders (as of March 31): 27
Peabody Energy Corporation (NYSE:BTU) is a long-term holding of Paul Singer’s, dating back to the first half of 2017. In the first quarter of 2022, the activist investor left his position in the coal miner unchanged, owning 25.9 million shares, by far the most of any of the hedge funds that are tracked by our database.
One of the 5 Best Coal Stocks To Invest In, Peabody Energy Corporation is benefiting from rapidly rising coal prices, which have more than tripled over the past year. Coal prices are anticipated to rise by another 25% or so by the end of the year, fueled by the growing global demand for power.
Peabody Energy Corporation’s coal revenue grew by 58% year-over-year in its latest quarter and could rise even higher in its next quarterly earnings report. While coal certainly isn’t a great long-term bet, there is short-term potential for further run so long as cleaner sources of energy aren’t capable of meeting the world’s power needs.
2. Marathon Petroleum Corp (NYSE:MPC)
Value of Elliott Management‘s 13F Position: $946 million
Number of Hedge Fund Shareholders (as of March 31): 44
Marathon Petroleum Corp, which has featured prominently in Elliott Management’s 13F portfolio since mid-2019, ranks second as of March 31. Elliott raised its stake in the refiner by 5% during Q1, lifting his holding to nearly 11.1 million shares. Hedge funds have been slow to buy back into MPC after abandoning the stock in droves in 2020.
Elliott began pressuring Marathon Petroleum Corp shortly after building its stake in the company, asserting that shareholders would be better served financially if the company were split in three. Elliott believed as much as $22 billion in shareholder value could be unlocked through such a move, creating three strong, independent companies that would be leaders in their fields.
Marathon Petroleum Corp launched several strategic initiatives in October 2019, including the separation of its convenience store operations as well as forming a committee to explore options for its midstream business. The company also agreed to initiate a search for a new CEO. Michael J. Hennigan took over as CEO from Gary Heminger less than six months later.
1. Howmet Aerospace Inc. (NYSE:HWM)
Value of Elliott Management‘s 13F Position: $1.48 billion
Number of Hedge Fund Shareholders (as of March 31): 45
Elliott Management’s top stock pick for the second straight quarter is Howmet Aerospace Inc., which it owned over 41 million shares of as of March 31, unchanged quarter-over-quarter. Two of the top performing funds in recent memory, Ray Dalio’s Bridgewater Associates, and John Overdeck and David Siegel’s Two Sigma Advisors, each built small stakes in HWM during Q1.
Howmet Aerospace Inc. has been a part of Elliott’s portfolio in some capacity dating back to 2016, when he owned a stake in Arconic Corporation (NYSE:ARNC) The two sides engaged in a somewhat acrimonious tilt as Elliott sought to overthrow Arconic’s leadership. In January 2017, the company’s board came out in support of chairman and CEO Klaus Kleinfeld, asserting that many of Elliott’s allegations against the company and its leadership were either misleading or unsubstantiated. Just three months later however, Kleinfeld resigned from his roles with the company, with the backing of the board.
Howmet Aerospace Inc. was split off from Arconic in 2020. Elliott sold out of the remainder of its stake in ARNC in the first quarter after selling off the majority of the position in Q4. Howmet grew its adjusted earnings per share by 41% year-over-year in the first quarter. While the company’s defense aerospace growth is expected to stumble this year, the commercial transportation and industrial gas turbine markets are forecast to grow throughout 2022.
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This article is originally published at Insider Monkey.
