Paul Singer's $1.9 Billion Bet

A review of Paul Singer's portfolio and his fearless investing strategies. His current focus: NXP Semiconductors (NasdaqGS: NXPI).


A Fearless Operator

Bloomberg called him the World’s Most Feared Investor, while Fortune magazine said he is one of the "smartest and toughest money managers in the hedge fund industry.” Others describe him as a vulture capitalist and the poster boy for greed.

Paul Singer is the founder and CEO of Elliot Management Corporation, one of the oldest hedge funds on Wall Street. He founded the company in 1977 after a short career as a lawyer. Today his company manages $23 billion, and Singer has built a personal fortune of $2.9 billion.

Singer is no stranger to controversy. He is most famous for suing the Argentinian government over bonds the country defaulted on. Singer’s firm eventually impounded an Argentinian naval ship in a Ghanaian port, using the ship as collateral in negotiations. The story ended with Argentina being forced to sell new bonds to repay the original bondholders.

The fight with Argentina was just one of the controversies Singer has been involved in. Another was when he started the chain of events at Samsung in 2015 that ended with the impeachment of the President of South Korea. He more recently got into a bidding war with Warren Buffett for control of a Texas Utility company and he also tried to force a restructuring at BHP Billiton, the world’s largest mining company.


Distressed Debt, Boardroom Battles and Lots of Litigation

Singer started out in convertible arbitrage but is now better known for investing in distressed debt. When it comes to investing in companies he is an activist investor and likes to restructure companies if he believes value can be unlocked. He is not afraid to use litigation to support his strategy. Singer has a history of buying stakes in companies and then forcing a takeover by another company – at a higher price.

The following examples illustrate the methods Elliot uses to generate returns:

  • Singer bought 8% of Compuware in 2012, before making a bid to buy the entire company. Although he didn’t ultimately buy the company, he managed to restructure it and bid the share price up in the process.

  • At Alcoa, Elliot bought a large enough stake to secure three board seats. It then forced a restructuring and break up of part of the business. By the time Elliot sold its stake the fund had netted a 104% return.

  • In the case of Mentor Graphics Corp, Elliot bought a 9% stake before pushing for a takeover by Siemens. Elliot netted 68% in the process.

  • When Akzo Nobel NV rejected a takeover bid from PPG Industries Inc, Elliot sued the company to try to oust its chairman. Eventually, Elliot agreed to a partial restructuring before selling its stake.

  • Elliot is currently trying to stop a takeover of NXP Semiconductors by Qualcomm. They wanted Qualcomm to pay more for the company, or for NXP to find a better offer elsewhere.

These examples illustrate how Paul Singer treats each investment as a campaign. The goal of each campaign is to influence events to increase the value of his stake. He doesn’t win every time, but he wins often enough to keep his shareholders very happy.


Elliott Management's Latest Form 13F Filing

On November 14, 2017, Singer's firm Elliott Management Corp filed their quarterly Form 13F regulatory filing. I reviewed the 13F filing to get a sneak peek at holdings in Elliott Management's massive portfolio.

Elliott Management's stock portfolio totals nearly $16.9 billion according to the latest filing. The list value of stock holdings is up 6.3% when compared to the last quarter. As a benchmark, the S&P 500 was up 3.9% over the same period.

Quarter-over-Quarter Turnover (QoQ Turnover) measures the level of trading activity in a portfolio. Elliott Management's QoQ Turnover for the latest quarter was 19.0%, so the firm appears to trade a significant percent of its portfolio each quarter.


Elliott Management's Largest Holdings

The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below here. The following table summarizes Elliott Management's Largest Holdings reported in the last filing:

Largest Holdings
Ticker Name Holding ($mil) % Of Portfolio
NXPI NXP SEMICONDUCTORS N V 1,858.9 11.0%
QQQ POWERSHARES QQQ TRUST 1,628.0 9.7%
HYG ISHARES IBOXX $ HIGH YLD CORP BOND 1,331.4 7.9%
ARNC ARCONIC INC 1,271.4 7.5%
HES HESS CORP 990.3 5.9%
XOP SPDR S&P OIL & GAS (ETF) 828.0 4.9%
BTU PEABODY ENERGY CORP NEW 614.8 3.6%

The seven positions above represent 50.5% of the hedge fund's total portfolio.


Elliott Management's 7 Largest Stock Buys In Q3

I also used finbox.io to find Elliott Management's largest buys last quarter. Here's the list of biggest buys determined by comparing the last two filings:

Stock He's Buying
Ticker Name Purchased ($mil) % Of Portfolio
NXPI NXP SEMICONDUCTORS N V 459.6 11.0%
ORIG OCEAN RIG UDW INC 439.6 2.6%
BTU/P PEABODY ENERGY CORP NEW 410.1 2.4%
XLV SPDR HEALTH CARE (ETF) 208.4 1.2%
VNQ VANGUARD REIT ETF 125.2 1.7%
NOMD NOMAD FOODS LTD 121.6 0.8%
SMH MARKET VECTORS SEMICONDUCTOR ETF 116.6 2.9%

It was interesting to see Elliot Management add another $460 million to its NXP Semiconductor holdings making it the largest position in its portfolio. Singer believes that the bid from Qualcomm "significantly undervalues" the company which is why he's added to his stake. He wants NXP to renegotiate with Qualcomm, find a better offer from another buyer or remain a standalone company.


Elliott Management's 5 Biggest Sells

Here's the list of the biggest position reductions determined by comparing the last two filings:

Stock He's Selling
Ticker Name Sold ($mil) % Of Portfolio
QQQ POWERSHARES QQQ TRUST 1,039.3 9.7%
XLE SPDR ENERGY SECTOR ETF 332.1 1.6%
XLK SPDR TECHNOLOGY SECTOR FUND 211.3 1.3%
MPC MARATHON PETE CORP 164.0 1.9%
AA ALCOA CORP 159.1 2.3%
Elliott Management's Recent Price Pullbacks

To find stocks in his portfolio that may be unpopular at the moment and trading at cheap valuations, I ranked his holdings by price pullbacks. The ranking table below lists the 3 stocks in Elliott Management’s portfolio by stock price performance over the last 30 days.

Recent Price Pullbacks
Ticker Name Price 1-mo Ago Current Price % Change 1-mo
ACAD ACADIA PHARMACEUTICALS $35.04 $28.65 -18.2%
AA ALCOA CORP $47.91 $40.91 -14.6%
MITL MITEL NETWORKS CORP $8.6 $7.66 -10.9%
Elliott Management's 6 Bullish Analyst Targets

Banks and brokerages often release 12 to 18 month price targets for the stocks they cover. Analyst upgrades and downgrades alone can often impact a company's stock price.

"In the short run, the market is a voting machine but in the long run, it is a weighing machine." - Benjamin Graham

The table below ranks stocks in Elliott Management's portfolio with most bullish analyst targets:

Bullish Analyst Targets
Ticker Name Upside (Analyst Target) % Of Portfolio
ACAD ACADIA PHARMACEUTICALS 73.8% 0.2%
PAH PLATFORM SPECIALTY PRODS COR 47.4% 0.7%
MITL MITEL NETWORKS CORP 45.8% 0.6%
EQT EQT CORP 34.5% 0.2%
AA ALCOA CORP 33.5% 2.3%
ECA ENCANA CORP 29.4% 2.6%

Most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.


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This is not a buy or sell recommendation on any security mentioned.

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