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.
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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.