Elliot Management’s 13F Stock Holdings & Strategy

Updated on October 16th, 2020 by Nikolaos Sismanis

Founded by Paul Singer in 1977, Elliot Management is one of the oldest fund managers with uninterrupted operations. As of its latest filing, the fund had around $73 billion of assets under management (AUM). While most of these assets comprise of financial derivatives, nearly $10 billion is allocated purely in U.S. public equities. Elliot Management holds a legendary amongst the investing community, not only for its long history of continuous success but also for its humble beginnings, including launching with just $1.3 million from friends and family. The company is based in New York but it also has operations in London, Hong Kong, and Tokyo.

Investors following the company’s 13F filings over the last 3 years (from mid-August 2017 through mid-August 2020) would have generated annualized total returns of -0.37%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 11.9% over the same time period.

Note:  13F filing performance is different than fund performance.  See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of Elliot Management’s current 13F equity holdings below:

 

Keep reading this article to learn more about Elliot Management.

Table Of Contents

Elliot Management’s culture and investment strategy

Elliot believes that to achieve its goal of generating consistent returns to its investors, there are several elements for the fund’s investment and risk-management activities that are vital.

These elements include:

The fund applies a multi-strategy trading approach that incorporates a broad spectrum of strategies, including, but not limited to:

Elliot will regularly take a leading role in event-driven situations to generate value or manage risk. For example, in May 2018, Elliott Management won a legal battle to control 2/3 of Telecom Italia’s board seats.

Elliot Management’s 10 largest public-equity investments

While the fund’s past-three year performance may seem underwhelming, it’s important to remember that the fund utilizes a number of strategies as named above. As a result, its public-equity performance is not accurate to the performance of the fund itself. Still, the company’s largest stakes in public equities are noteworthy, as these companies represent investable opportunities in which Elliot has identified profitable opportunities.

Howmet Aerospace Inc. (HWM)

Howmet Aerospace provides superior engineered solutions for the aerospace and transportation industries. The company manufactures jet engine components, aerospace fastening systems, and mission-critical applications to be used both in defense and commercial aircraft.  While the company’s defense operations have remained robust, powered by multi-year contracts with governmental entities, its commercial segments have suffered significantly due to COVID-19. The stock is Howmet’s largest single-stock investment, occupying around 22% of its public-equity portfolio.

Due to Boeing 737 Max’s issues and canceled orders from airlines for additional planes due to the pandemic, demand for Howmet’s plane components has dramatically declined. Thankfully, the company has remained profitable due to its defense backlog, though management cut the dividend to preserve liquidity.  At its current stock price of around $18, the company trades at around 10 times its under-normal-conditions earnings, which means that current investors may be able to grab shares on the cheap, assuming they are willing to hold the stock for the long-term. Still, COVID-19 remains active, and the aviation industry’s resumption to normality remains unclear. Hence new investors must be aware of such risks.

Elliot holds approximately $730 million worth of shares, owning around 8.3% of the company, which displays the fund’s active involvement goals, as mentioned earlier. The position remained unchained as of Elliot’s latest f13 filing, signaling that the fund remains positive in the company’s long-term story, despite the recent challenges.

eBay (EBAY) 

Elliot’s second-largest individual stock holding is eBay, in which the fund holds around half a billion dollars’ worth of equity. Despite the stock’s rally during the previous quarter, management held every single share during Q2, which has resulted in further gains. Shares currently trade near an all-time high, as e-commerce has been boosted by COVID-19. Flipping all sorts of products online during the staying-at-home economy has also assisted with growing sales.

Despite their current seemingly high levels, shares remain attractively priced, with a P/E of around 20. Further management has been executing aggressive buybacks, which should keep on delivering long-term shareholder value creation, powered by eBay’s consistently positive bottom line.

The graph below displays eBay’s total active buyers per quarter, which displays continuously increased volumes for the company’s market place.

Source: Statista

Marathon Petroleum (MPC)     

The energy sector has had a rough past few months, as the pandemic caused a massive decline in the aviation and transportation industries. While most companies in the sector cut their distributions due to deteriorating financials, Marathon Petroleum has sustained this year’s increased DPS, as its higher exposure in midstream services has helped maintain a borderline profitable bottom line.

Shares currently yield nearly 8%, and Elliot kept its position steady during the quarter, which displays confidence for the company’s future. Considering Elliot’s position in Marathon and Howmet aerospace, the fund possibly expects a quick and positive outcome out of the pandemic.

Facebook (FB) & Twitter (TWTR)

Unlike the energy sector mentioned earlier, the social media giants have been posting record sales, attracting huge traffic levels due to everyone spending even more time inside as a result of the pandemic. Consequently, user growth has remained strong in both platforms.

Facebook has been consistently expanding its Monthly Active Users (MAUs), which as of last quarter, hit 2.7 billion.

With advertisers having nowhere else to advertise effectively, and with the platform proving excellent conversion rates, Facebook’s top and bottom line have been snowballing.

During Q2 alone, Facebook reported $5 billion of net income, despite huge brands boycotting Mr. Zuckerberg’s company. Considering the platform’s excellent resilience, its robust financials, and the stock’s attractive valuation, Facebook is likely to be a great long-term investment, despite its business model’s socio-political risks.

Twitter, on the other hand, has had more challenges in effectively monetizing its user base. However, with analysts expecting improving financials amid Twitter’s potential plan to roll out a subscription service, the stock is currently trading near a 5-year high, above $45. Elliot increased its stake in Twitter by 16%, sharing such bright expectations for its future as well.

Welltower (WELL)         

Welltower specializes in a senior-housing real estate management, concentrated in major, high-growth markets such as the United States, Canada, and the United Kingdom. The company’s financials have remained incredibly robust during the pandemic, as its rental revenues are contractually locked under multi-year contracts.

However, at management’s discretion to preserve liquidity, the REIT cut its dividend by 30%, which caused investors to dump shares back to their 10-year lows. With historically proven growth achieved, as well as its current post-cut dividend yield of 4.5%, the stock may be offering a decent entry point for income-oriented investors looking to hold into the long term.

Arconic Corporation (ARNC)

Arconic Corporation produces and sells aluminum sheets, plates, extrusions, and architectural products globally. As industrial output and construction activities have been lagging during the pandemic, the company’s revenues have been hit hard, with Q2 ending up being a money-losing quarter.

Elliot’s purchase of around 10.3 million shares was entirely new, as shown in the fund’s f13 filing, and is likely one of the “distressed-equity” situations that the fund specializes in. Funnily enough, Arconic shares have been rallying higher over the past few months, because the company’s IPO in the midst of pandemic had already priced shares at an incredibly depressed valuation.

Elliot holds around 10% of the company’s outstanding shares, which could involve the fund having an active role in management, as one of its strategies aims to achieve.

AT&T (T)

Last September, Elliot hit the news when the company reported it had acquired a $3.2 billion stake in AT&T. Today, the company owns just around $200 million worth of shares, as the fund’s commitment to what it previously was a high conviction pick didn’t last long.

AT&T is a controversial company. Some investors love it, while others hate it. In any case, the company is a cash cow, paying a 7.5% dividend yield, while also being a 36-year Dividend Aristocrat.

Investors looking to allocate funds in an all-weather income-producing investment at a reasonable valuation are likely to find comfort in AT&T’s clockwork dividend payments.

Source: Company Filings, Author

Peabody Energy Corp. (BTU)

Elliot had been gradually adding shares in Peabody Energy until last year, currently owning around 30% of the coal mining business. Shares are currently trading at just $1.75, while Elliot’s estimated average buying price over the years was near the $28. Considering that Elliot has not sold any shares despite the stock’s horrific performance, we believe its position is just a vehicle to hedge against a potential scenario of improving coal business prospects and not an actual long-term investment. Investors should stay away from the small-cap company, as shares have been nosediving nonstop for years, and the coal industry’s future is entirely gloomy.

American Airlines Group (AAL)

In line with its pick in Howmet Aerospace, Elliot has been a believer in the aviation industry, making a quick comeback. The fund picked up around 4.5 million shares during the quarter, which is likely to deliver huge gains if the COVID-19 is indeed pushed back over the next couple of years.

At the same, airlines remain a risky bet, with several liquidity problems and huge write-offs. For investors looking to get into the sector, American Airlines and Ryan Air, in which Elliot also holds a smaller position of around $43 million, may be two decent options. At the same, great risks remain, with several unclear variables making it hard to project the industry’s future.

Final Thoughts

Elliot Management has an outstanding run to display. From humble beginnings, the fund has grown into one of the world’s biggest, all while led by the same manager since its inception, Paul Singer.

Considering that the fund utilized multiple strategies at once, a relatively small part of its AUM is allocated towards individual public equities. However, the relatively small sample of stocks is enough to showcase the company’s strategy of investing in distressed equities and taking relatively sizeable stakes in companies to have some sort of active control on their board.

Some of their holdings are quite risky, while others may require a combination with the fund’s various derivatives to pay off. Still, investors can get a decent look at which companies the fund is fond of and potentially consider replicating as well.