We recently published a list of Paul Singer’s Latest Portfolio: Top 10 Stock Picks. In this article, we are going to take a look at where Seadrill Limited (NYSE:SDRL) stands against other top stock picks from Paul Singer’s latest portfolio.
Stock markets are as risky as they have ever been. That’s the sentiment echoed by billionaire investor Paul Singer. The sentiment comes as the overall equity market has turned bearish, with major indices pulling back from record highs. The S&P 500 is already down by 10% and is officially in the correction phase, a development triggered by a string of developments.
A ferocious trade tariffs spat triggered by US President Donald Trump has sent shockwaves in the market, fueling a string of sell-offs. Similarly, growing concerns about the global economy plunging into recession amid a trade spat between the US and its allies have also unsettled the markets.
Singer, the brains behind Elliott Management, one of the most revered activist hedge funds, believes investors have become too complacent and could end up paying a hefty price.
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“Several years without a major downturn have lulled people into thinking that they’ll always be bailed out, that there’ll never be another bear market,” Singer said in a podcast hosted by the CEO of Norges Bank Investment Management.
Similarly, Singer thinks that artificial intelligence is overhyped and valuations in the sector have gotten out of hand. According to Singer, leverage and risk-taking are significant concerns in the markets and among governments. The billionaire investor has warned of the growing trend by central banks to push interest rates close or below zero as one of the ways of keeping economies afloat.
“We’re talking about deep recession-type spending programs, spending deficits, support programs at a time when there was no real recession,” the billionaire said about the stimulus bonanza that followed the pandemic.
The Elliott Management chief has also warned that cryptocurrencies have what it takes to threaten the dollar’s dominance. According to Singer, the Trump administration’s embrace of cryptocurrencies is helping fuel a speculative mania that could cause havoc.
The comments are made at a time when Elliott Management has emerged as one of the most formidable hedge fund managers in the world, placing bold wagers on anything from government bonds to distressed equities. Governments and C-suite executives alike fear it, and its average annual returns are 13%. However, as the Florida-based company has grown in size and success, senior employees at its European division have felt more and more marginalized.
Amid the growth, the fund suffered a major setback when its second most senior staffer jumped ship for another hedge fund. Nabeel Bhanji has opted to join Citadel barely a year after being promoted to a full equity partner at the $70 billion hedge fund. He joins big-name financiers James Smith and Franck Tuil, who left Elliott Management to start their own funds. Sebastien de La Riviera, Mark Wills and Mark Levine have also left.
Amid the significant exodus, Elliott Management remains a global powerhouse in activist investing. The hedge fund is increasingly investing in companies it believes are undervalued and trying to force changes that it believes have the potential to unlock hidden value. Some of the changes include a management shakeup, the spin-off of some units, or the sale of the entire business.
Our Methodology
To make the list of Paul Singer’s Latest Portfolio: Top 10 Stock Picks, we selected stocks based on Elliott Management’s Q4 2024 13F filings. We then examined the stocks for why they stand out as Singer’s long-term solid plays. Finally, we ranked the stocks in ascending order based on the hedge fund’s stakes in them. Additionally, we have mentioned the hedge fund sentiment around each stock, as of Q4 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Drilling rig silhouetted against a setting sun in an offshore location.
Seadrill Limited (NYSE:SDRL)
Elliott Management’s Equity Stake: $144.19 Million
Number of Hedge Funds Holding Stakes: 42
Seadrill Limited (NYSE:SDRL) is an energy company that provides offshore drilling services to the oil and gas industry worldwide. It owns and operates drill ships and semi-submersible rigs for shallow and ultra-deepwater operations in benign and harsh environments. It is one of the companies feeling the brunt of lower oil prices. The company’s fourth quarter 2024 revenues dropped to $280 million compared to $354 million in the third quarter.
Lower revenue came as the company faced lower contract revenues that were down by 22%. Amid the decline, Seadrill Limited (NYSE:SDRL) scored $1 billion in backlog, which should be a key revenue driver. Additionally, Seadrill sold the cold-stacked West Prospero at a favorable valuation of $45 million. Seadrill also reiterated its commitment to return value to shareholders, having returned $100 million through buybacks.
According to the chief executive officer Simon Johnson, Seadrill Limited (NYSE:SDRL) is well-positioned to navigate market volatility backed by a strong balance sheet and durable backlog extending to 2029. The company has a backlog of about $3 billion and has about 75% of available rig day’s contracts across its marketed and managed rig fleet.
Overall, SDRL ranks 9th on our list of top stock picks from Paul Singer’s latest portfolio. While we acknowledge the potential of SDRL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SDRL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.