By Eric Winter
Long-term holdings in a hedge fund manager's portfolio can relate a certain conviction about his or her outlook on a stock. Coupling that with how much and how rapidly the manager added to the position over time could be seen as a worthwhile probability study that amplifies those convictions. We use similar parameters to come up with our proprietary small-cap strategy that has returned 37% from September 2012, to March 2013, versus the market's 12.9% return (read more here). Billionaire Paul Singer started Elliott Associates in 1977 and has continuously remained at its helm, and we take special notice over his market moves. Here is our take on the fund's holdings that have been in play for a year or longer and have seen the largest additions over the past four quarters.
BMC Software, Inc. (BMC) was a big portfolio mover for Singer. The IT company comprised 1.9% of the fund's $3.2bn in AUM in Q1 2012 but ended the year as a 16.23% holding for Elliott. In percentage terms, the fund's share size jumped over 500% while the stock gained 20% in the same time period. BMC has tacked on another 10% in gains so far this year, pushed up by M&A buzz and Elliott's nudging to streamline its operations. Two syndications of PE firms are expected to make bids for the company in late April. D. E. Shaw has over $67mm employed in BMC.
Oracle Corp. (ORCL) lands in the second spot of our screen after Elliott grew its position size by almost 300% in 2012. However, the holding only amounts to 0.57% of the fund's total portfolio, up from .1% at the start of last year. ORCL has been hungry for acquisitions this year, snatching up telecom companies Tekelec and Acme Packet and filing for a mixed shelf last week, possibly hinting at more purchases in the pipeline. The stock is down about 2.5% on the year. Billionaire Seth Klarman of Baupost Group carries over 10.4mm shares of ORCL (take a look at his fund's major positions here).
Compuware Corp. (CPWR) joins BMC and ORCL in our top three, conveying Elliott's preference for the software industry. The fund has allocated 4% of its AUM to the $2.5bn software company, making it the largest small-cap holding in Singer's portfolio. He built his position by 158% from Q1 2012 to Q4 and even attempted to purchase the company for $11/share at the beginning of this year (his offer was rejected, however). Buyout rumors are still prevalent in CPWR however, with large firms like Blackstone, TPG, and Thoma Bravo showing interest since. Billionaire Tom Sandell of Sandell Asset Management owns over 6mm shares of CPWR.
Coronado Biosciences, Inc. (CNDO) saw its share in the fund more than double in 2012, starting with 1.7mm shares and ending with 3.7mm shares. The bio pharmaceutical company has a very small market capitalization, coming in at just over $300mm. The stock was a loser for investors throughout 2012, depreciating by 27%. However, since the start of 2013, CNDO has blasted up 163%, boosted along by positive mentions from ratings teams at Bank of America, Canaccord, Piper Jaffray, and Roth Capital. The stock is relatively underrepresented amongst the 400+ hedge funds we track, although D.E. Shaw maintains a small, 18,000 share position.
General Motors Company (GM) rounds out our list of big movers in Elliott Associate's portfolio. The automaker started 2012 with 740,000 shares owned by the fund but ended the year with 1.5mm. GM generated a very respectable 37% return during that time period. General Motors has set its focus on Asia (specifically China) in 2013, intending to up its production capacity to 5mm automobiles per year after opening four new plants in China (slated to be built over the next three years). In mid-April, GM reported that both its Q1 auto sales and global market share increased year over year. Billionaire David Einhorn of Greenlight Capital owns over 21mm shares of the stock (see his other holdings here).