In this article, we presented billionaire Paul Singer’s top 10 stock picks that helped in generating double-digit returns in 2020. Click to skip ahead and see Billionaire Paul Singer’s Top 5 Stock Picks.
Billionaire Paul Singer’s hedge fund Elliott Investment Management underperformed compared to the broader market in 2020 but the firm still managed to generate a 12.7% return on its investments, which it marks as one of the best returns in the past decade, according to an investor letter. Elliott Management remained profitable throughout the pandemic year and it has generated positive returns every month even in March when stocks markets collapsed at a historic pace.
Founded in 1977 by Paul Singer, The New York-based hedge fund, also generated low double-digit returns from its international and onshore funds. Paul Singer has early predicted quarantine and coronavirus related disruptions. In an internal memo on February 1, he warned employees to “make arrangements so that you do not have to leave your home for a month if that becomes necessary.”
Although Elliott has been diversifying its investments across a variety of assets, it is famous for its activist positions. The firm has pushed for changes at companies like SoftBank, Twitter (NYSE: TWTR), and AT&T (NYSE: T).
Billionaire Paul Singer took almost 16 new activist positions in 2020. Elliott has also been popular for creating a stake in small companies and then finding cash-rich private equity funds seeking acquisitions. The firm also offered to buy small companies instead of finding other buyers.
Paul Singer of Elliott Management
For instance, Elliott took a stake in software company Novell in 2010 and then offered to buy the entire equity stake for $1 billion. Similarly in 2012, the firm initiated an 8% stake in Compuware and then presented an offer to buy the company. It took a stake in BMC, Riverbed, and Informatica in the following years, and all these small companies were acquired by other big players.
However, in the past few years, the firm has slightly shifted its strategy of investing in small companies. It is now targeting bigger tech firms. eBay (NASDAQ: EBAY) has divested its Stubhub business after Elliott’s advice and the firm also criticized Twitter CEO Jack Dorsey for keeping a key position in Twitter and Square (NYSE: SQ).
Nevertheless, the firm’s strategy of investing in high growth companies from information technology and consumer discretionary sectors helped in generating one of the best returns of this decade. The information technology sector accounted for 38% of its overall 13F portfolio while consumer discretionary represented over 12% of the portfolio. The hedge fund also likes to invest in the material, industrial, and communications sectors.
While Paul Singer’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start our countdown on billionaire Paul Singer’s top 10 stock picks to see the contribution from each stock to overall returns. Its top 10 stock holdings account for 72% of the overall 13F portfolio.
10. Noble Energy (NYSE: NBL)
Billionaire Paul Singer’s hedge fund has initiated a big position in struggling Noble Energy (NYSE: NBL) during the September quarter and the company was acquired by energy giant Chevron Corporation (NYSE: CVX) in July for $5 billion in a stock swap. Shareholders of Noble have received 0.1191 shares of Chevron for each Noble share, representing a per Noble share of $10.38.
Elliot Investment Management had bought 15.7 million shares of Noble Energy at an average estimated price of $8.55 per share.
9. Twitter, Inc. (NYSE: TWTR)
The New York-based hedge fund’s strategy of initiating a position in Twitter, Inc. (NYSE: TWTR) during the first quarter of 2020 helped in generating positive returns for 2020. Shares of social media company rallied almost 66% in the last twelve months, thanks to staying at home policies.
Carillon Eagle Mid Cap Growth Fund has highlighted strong confidence in Twitter in an investor’s letter. Here is what Carillon Eagle Mid Cap Growth Fund stated:
“Twitter’s user count continues to accelerate due to the global stay-at-home situation as well as the numerous positive changes the company has introduced on the platform in order to keep users engaged. The addition of various topics and lists along with the expansion of video have led to more users joining the platform and kept existing users more engaged. We believe the next positive development on the horizon could come from the company’s ability to increase the monetization of these users.”
8. Arconic Corporation (NYSE: ARNC)
Elliot Investment Management has initiated a position in aluminum manufacturer Arconic Corporation (NYSE: ARNC) during the second quarter when its shares were under pressure. The hedge fund’s strategy worked because shares of Arconic Corporation rallied almost 200% in the last nine months.
The share price rally is backed by improvement in aluminum prices and stronger than expected financial results. Arconic generated $1.42 billion in third-quarter revenue, up 19% from the previous quarter. The company expects 2020 revenue in the range of $5.7 billion. Aluminum prices jumped close to 30% since last April.
“The steps we took to strengthen our financial position combined with the strong recovery of automotive demand and our employees’ hard work enabled us to end the temporary salary reductions and reinstate the 401k match for all impacted employees. While there is uncertainty in the global economy, we demonstrated our agility in responding to challenges quickly and effectively. I appreciate the sacrifices made by our employees and I’m grateful for their continued commitment during these last two quarters to strengthen our company,” Tim Myers, Chief Executive Officer said.
7. Uniti Group Inc. (NASDAQ: UNIT)
The real estate investment trust Uniti Group Inc. (NASDAQ: UNIT) also performed well in 2020 and helped the hedge fund to generate one of the best returns in a decade. Elliot has created a position in Uniti Group during the third quarter of 2020 by purchasing 20.4 million shares for $215 million. Shares of Uniti Group grew 30% in the last three months, outperforming S&P 500 growth of 12% during the same time.
Besides share price gains, Uniti has also been returning cash in the form of dividends. It currently offers a hefty dividend yield of 5%. The company expects 2020 adjusted EBITDA in the range of $812M-$821M, compared to the consensus estimate for $814.2M.
6. Nielsen Holdings plc (NYSE: NLSN)
The measurement and data analytics company Nielsen Holdings plc (NYSE: NLSN) is the long-running stock holding of billionaire Paul Singer’s 13F portfolio. The hedge fund first initiated a position in Nielsen in 2018 and it appears that Nielsen’s stock underperformed in the past few years. However, shares rebounded slightly in December after the company guided 2021 free cash flow around $580M-$630M, and organic revenue growth of 4.5%.
“With the rapidly evolving landscape and on-going shifts in consumer behavior, it is no longer acceptable to take a siloed approach to our clients’ video plans,” said Doug Ray, CEO, Dentsu Media. “Cross-media measurement is paramount to maximize reach across platforms with the right frequency. We are encouraged by Nielsen’s commitment to a single measurement solution and unified framework that will drive comparability across TV and digital video so that our clients can better allocate dollars and maximize ROI.”
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Disclosure: No position. The article Billionaire Paul Singer’s Top 10 Stock Picks is originally published on Insider Monkey.
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