These Are Billionaire Paul Singer’s Stock Picks That You NEED to Avoid

Smart investors actively track the moves made by the titans of the hedge fund world, such as billionaire activist investor Paul Singer of Elliott Management. They know that these hedge funds manage billions of dollars’ worth of investors’ money and do extensive and costly research on stocks before they buy them.

However, that doesn’t mean all of their stocks picks are wildly successful; or even mildly successful. Our research has shown that Singer’s large-cap picks returned an average of just 0.04% per month between 1999 and 2017. Meanwhile, the S&P 500 TR Index returned 0.50% per month during the same period. It should be noted that we used his 13F portfolio and applied a 2-month delay to calculate his returns, so they likely differ from his actual returns. However, this doesn’t change the fact that Singer has no clue regarding large-cap stocks. Nor are his large-cap results getting any better. In the last four years, his large-cap stock picks actually lost 0.03% per month vs. a 0.99% monthly gain for the SP 500 TR.

The fact that Singer’s results are so poor in large-cap stocks means his results in smaller stocks are exceptional, as the famed investor has delivered an annualized return of 9.7% over the past five years, greatly outpacing the broader hedge fund industry. To uncover his absolute best picks, we analyzed Singer’s historical stock picks in the new issue of Insider Monkey’s monthly newsletter and identified a formula based on his picks that outperformed the market by 1 percentage point per month over the last ten years.

In this article, we’ll take a look at the five large-cap stocks that Singer owned at the end of 2016, when we first told investors to steer clear of his large-cap picks. We’ll see how they’ve performed since then and analyze how the billionaire investor has traded them over the last year-plus.

Closed Positions: Let’s start by looking at Singer’s three large-cap positions at the end of 2016 which have since been sold off. Those positions were in Allergan plc Ordinary Shares (NYSE:AGN), Marathon Petroleum Corp (NYSE:MPC), and HCA Holdings Inc (NYSE:HCA).

Once the darling of the hedge fund industry, Allergan has rapidly lost smart money support in recent quarters, including the support of Elliott Management, which sold off its Allergan plc Ordinary Shares (NYSE:AGN) position of 2.74 million shares during the first-quarter of 2017. Allergan shares have lost over 30% since the end of 2016.

Singer also sold off HCA Holdings Inc (NYSE:HCA) during the first-quarter of last year after buying 885,000 shares in the final quarter of 2016. As the stock was volatile during those two quarters (though up by 13% overall) and we don’t know the dates that Elliott Management bought and sold its shares, it’s impossible to judge the success of the position. What we do know is that Elliott missed out on further gains by selling HCA Holdings Inc (NYSE:HCA) when it did, as shares have gained 17% since the end of the first-quarter of last year.

Singer’s Energy Bets Pay Off: Singer also sold off some of his Marathon Petroleum Corp (NYSE:MPC) position in Q1 2017, selling 2.48 million shares of the stock, about 40% of his holding in it, during that quarter. He would build his position back up to 4.96 million shares by the end of the third-quarter before unloading the entire position by the end of 2017. Marathon Petroleum Corp (NYSE:MPC) turned out to be a successful position for Singer, as the stock gained 31% in 2017.

Singer has been more active in energy stocks since the second-half of 2016 and was rewarded for his efforts with some other strong performers from the sector in 2017, including former small-cap NRG Energy Inc (NYSE:NRG), which gained over 130% in 2017, and Encana Corp (USA) (NYSE:ECA), which gained another 13% in 2017 after gaining 130% of its own in 2016.

On the next page we’ll look at Paul Singer’s current long positions in large-cap stocks, both of which were first bought in the final quarter of 2016.

Cognizant Technology Solutions Corp. (NASDAQ:CTSH)

How Many CTSH Shares Elliott Management Owns: 1.12 million

How Much Money Elliott Management Has Invested in CTSH: $79.86 million

Elliott’s Activist Pressure Pays Off: Elliott Management sent a letter to Cognizant Technology Solutions Corp. (NASDAQ:CTSH) shortly after taking an activist position in the company in November 2016. By the following February, the pressure had paid off, as Cognizant entered into an agreement with Elliott that included the company replacing three members of its board and announcing that it would accelerate its shift towards digital and start returning more money to shareholders.

The results have been impressive for both parties, as CTSH shares have gained 45% since the end of 2016. Cognizant’s digital business now accounts for 27% of the company’s revenue and grew by 30% in the fourth-quarter of last year and several analysts are bullish on the company outperforming the already-solid growth and margin expansion estimates for 2018 that were issued by the company.

NXP Semiconductors NV (NASDAQ:NXPI)

How Many NXPI Shares Elliott Management Owns: 16.44 million

How Much Money Elliott Management Has Invested in NXPI: $1.92 billion

NXP Semiconductors NV (NASDAQ:NXPI) is another large-cap stock that bucked the long-term trend of Elliott Management whiffing on such picks. Elliott first bought a small position in the stock near the end of 2016 but sold it off during the next quarter. However, in the second-quarter of last year, Elliott re-opened a much larger position of 12.37 million shares, which has since been raised by another 4.07 million. NXPI has gained 27% since the end of 2016 and 13% since the middle of 2017, by which point Elliott had amassed the bulk of its position.

Singer Balks at QUALCOMM, Inc. (NASDAQ:QCOM) Bid: Qualcomm initially offered $110 per share to buy NXP in a proposed deal offered at the end of last October. However, shares shot past that mark over the following year as the deal remained in regulatory limbo, prompting Elliott to launch an expensive activist campaign to ensure that shareholders didn’t bite on the offer. Elliott argued that NXP’s shares were worth at least $135, though the fund has since backed a revised $127.50 per share offer made by Qualcomm, which is itself trying to fend off a takeover bid from Broadcom Ltd (NASDAQ:AVGO).

All in all, 2017 was a strong year for Singer’s large-cap stock picks. However, historical data tells us that it was an outlier that is unlikely to be repeated. It should also be noted that Singer’s successful large-cap positions were in companies that were just small enough that he was able to exert on them the same kind of activist pressure which has made him so successful investing in smaller companies. That is not always the case with Singer’s large-cap picks, which is why we continue to warn investors to stay away from them, turning instead to his biggest money makers year-in and year-out, in which he is adept at working his activist magic.

Disclosure: None