Elliott Management Goes Activist on AT&T

Paul Singer's hedge fund firm Elliott Management has gone activist on AT&T (T), sending a letter to the board to outline what they feel is a 'compelling value-creation opportunity.  Elliott now owns $3.2 billion worth of shares and they see 65% upside to recent trading levels.

Elliott writes, "Elliott  made the investment in AT&T – among  its largest ever – because it exhibits a unique combination of historical underperformance,   a  depressed  valuation,  well-positioned  assets and  a clear path forward to generate extraordinary  value  for shareholders and other stakeholders."


Elliott's Letter to AT&T

Embedded below is Elliott's Letter & Presentation on AT&T.  It includes numerous charts and highlights T's valuation as well as struggling business lines:



You can also visit the website they've setup: activatingatt.com

Paul Singer Chats With David Rubenstein

Paul Singer of hedge fund Elliott Management sat down with Carlye Group co-founder David Rubenstein to chat at Bloomberg Invest New York.

They talk about how Singer founded Elliott, investing, and more.

Elliott manages $34 billion now and started in 1977 with $1.3 million.  Singer was a practicing lawyer at the time but started with friends and family money as he found investing much more enjoyable.

Convertible bond hedging was the first strategy Elliott used for around ten years. (Elliott, by the way, is Singer's middle name).  Over 40 years, Elliott has compounded at 13.5% net.

Embedded below is the video of Singer's chat with Rubenstein:



For more profiles of prominent investors, check out Howard Marks' recent interview with Bruce Karsh.

Delivering Alpha Conference Notes 2016: Singer, Dalio, Chanos, Miller & More

CNBC & Institutional Investor's Delivering Alpha Conference is underway and below are some notes.  This post will be updated throughout the day as the various speakers/panels are ongoing:


Delivering Alpha Conference Notes 2016

Paul Singer (Elliott Associates):  Said that it's a "very dangerous time in global markets" right now.  Argued central bank independence doesn't really exist.  Noted that Bank of Japan is basically a top-10 shareholder of various Japanese corporations but the economy hasn't rebounded.  Called it insane, "It's not working, but they keep going."  Feels that investors are careless about inflation threat.  Says sell long-term bonds.    "There will come a time when inflation, despite growth suppressive policies can blow through targets and surprise everyone."  Says we're basically in the middle of close to a 40 year experiment in how leveraged a system can be, and in how many ways.  Thinks gold as a directional asset is underrepresented in portfolios "as the only money and store of value that has stood the test of time that is, in my view, undervalued and underpriced in today's world and sort of is the opposite of confidence in central banks."


Ray Dalio (Bridgewater Associates):  Discussed ways to spur economic growth with Timothy Geithner.  Dalio says, "We're in a situation where central banks want to drive you out of cash and out of bonds."  Called it a dangerous situation, as central banks run out of assets to buy and push investors into riskier assets.  Dalio thinks raising rates is risky as it's not priced into the yield curve.  "There's only so much you can squeeze out of a debt cycle and we're there, globally."


Jim Chanos (Kynikos Associates):  Still short Alibaba (BABA), says they're "buying anything that's for sale, just burning cash."  He's also still short Tesla (TSLA) and SolarCity (SCTY).  Says the two companies combining basically puts TSLA on a path to potential bankruptcy.


Carl Icahn (Icahn Capital): Said he's requesting from the FTC the right to own up to 50% of Herbalife's (HLF) outstanding shares.  Currently has the right to around 35% of the company.  Re: the market, "I think it's very dangerous in the market right now.  If they don't raise rates, I think we're in a major bubble."  There's a problem either way with a dilemma if you raise rates or if you don't.  Says the economy is messed up because of people like Janet McCabe at the EPA.  Also: "I hate to be immodest but I've returned 28% annualized since inception."


Marc Lasry (Avenue Capital):  Said that you can "make a lot of money on direct lending," stepping in for reluctant banks.  On investing - find people who are talented / engaged / who care and invest with and then don't worry about daily/monthly liquidity.


Bill Miller (Legg Mason):  Likes Amazon (AMZN) or Facebook (FB) compared to Alphabet (GOOG/L) due to the growth rates and margins.  Thinks AMZN doubles in 3 years.  Also likes Valeant Pharmaceuticals (VRX) long, one of his larger positions.  His main trade idea was long S&P 500, short 10-year Treasury (dividend yield on S&P is higher).


Robert Bishop (Impala Asset Management):  Best idea was Teck Resources (TCK): improving China demand, management has cut costs, end of metals 5-year downtrend.  Says Freeport McMoran (FCX) still has a worrisome debt picture.


Barry Sternlicht (Starwood):  Real estate in New York City is "a disaster" with rents at the high-end down 15%.  Noted the problem many investors face: "you have to invest in something, you can't just sit in cash."  On Tesla, says he loves the car but would probably be short the company.  Questioned Pinterest's valuation, arguing it seemed like a lot of money for a bulletin board.  Said Doppler Labs could be like the next Oculus Rift.


Mary Erdoes (JPMorgan):  "They're called crowded trades when they don't work and momentum trades when they do work."  Says it's time to weed out the stock pickers who aren't the best. 


Dawn Fitzpatrick (UBS):  Likes merger-arbitrage, argues that bank prop trading desks exiting keeps spreads attractive and wide on bigger deals.  Said short-term alpha is harder and that investors need to be more patient.  Says women are less emotional investors and better at cutting losers.

Elliott Management Writes Letter to CDK Global; Sachem Head Trims CDK Stake

Two activist investors have been active regarding their positions in CDK Global (CDK) recently:


Elliott Management Sends Letter to CDK Global

First, Paul Singer's Elliott Management has sent a letter to CDK Global.  In it, Senior Portfolio Manager Jesse Cohn outlines how they want the company to adopt the steps in the Value-Maximizing Plan 'without delay.' 

Elliott notes they've had discussions with shareholders that represent more than half of CDK's shares outstanding and many of these investors want the company to improve CDK's business operations and capital return program.

The hedge fund believes that, "Reducing product complexity will shorten product implementation times.  Enhanced leveraging of technology and automation will reduce customer response times.  Improved software version discipline will free up funds for higher overall product quality and a better customer experience as a greater proportion of R&D spend would be committed to new features rather than simply maintaining older products.  Implementing an automated contracting system will deliver a simplified, more transparent set of invoices for customers."

Elliott feels that CDK's share price should reach $81 or higher in 14 months if these steps are implemented.

You can read the full letter here.



Sachem Head Capital Trims CDK Stake

Second, Scott Ferguson's activist firm Sachem Head Capital has filed an amended 13D with the SEC regarding their CDK Global (CDK) stake.  Per the filing, Sachem now owns 6.8% of the company with 10.49 million shares. 

The filing also notes they have additional economic exposure to approximately 3.15 million shares under cash-settled total return swaps.  So their total aggregate exposure is actually 8.8% of the company with 13.65 million shares.

This means they've trimmed their position by a little over 1 million shares since the end of the first quarter.  Their trading data indicates they were selling in mid-to-late April, early May, and early June at prices ranging from $47.50 to $57.74.

Per Google Finance, CDK Global is "a provider of integrated information technology and digital marketing/advertising solutions to the automotive retail industry. The Company's segments are Automotive Retail North America (ARNA), Automotive Retail International (ARI) and Digital Marketing (DM). The Company's solutions automate workflow processes from pre-sale targeted advertising and marketing campaigns to the sale, financing, insurance, parts supply, and repair and maintenance of vehicles. Its automotive retail solutions offer technology that helps supply side of the retail value chain. It offers digital marketing solutions to enable its clients to create demand for their products by designing and managing complete digital marketing and advertising strategies for their businesses. The Company, through its DM segment, provides a suite of digital marketing solutions for original equipment manufacturers and automotive retailers, including Websites and management of their digital advertising spend.."

Paul Singer's Interview at the Dealbook Conference

If you missed it, Elliott Management's Paul Singer sat down with Andrew Ross Sorkin at the Dealbook Conference a few months ago to talk about the global investment landscape.

Embedded below is the video of Paul Singer's talk:

Elliott Management Boosts F&C Asset Management Stake

Paul Singer’s hedge fund firm Elliott Management has increased its stake in F&C Asset Management (LON: FCAM). At the end of February, we noted that Elliott held the equivalent of 11% of FCAM’s voting rights.

But now due to trading on March 19th, Elliott has increased the position to 17.5%, with the whole position again held via contract for difference (CFDs/ derivatives).

Per Google Finance – “F&C Asset Management plc (F&C) is an asset management company.  The Company operates in three segments: F&C, F&C REIT and Thames River Capital (TRC). The  Company’s clients are insurance companies, institutional, retail and wholesale investors. The  Company manages portfolios across multiple asset classes on behalf of a range of clients including  insurance funds, pension schemes, public authorities and charities as well as private individuals through savings schemes, investment trusts and mutual funds. The Company’s subsidiaries include  FP Asset Management Holdings Limited, F&C Asset Management Services Limited, ISIS Investment Manager plc, F&C Managed Pension Funds Limited and F&C Treasury Limited.”

Elliott Management Discloses F&C Asset Management and Alliance Trust Stakes

Paul Singer’s Elliott Capital Advisors activist hedge fund has made two new disclosures in London recently.  


F&C Asset Management Stake

Elliott started a new position in F&C Asset Management (LON:FCAM) with an 11% stake. Half of the holding is held via contract for difference (CFD) / derivatives.  F&C Asset Management has recently received a takeover offer from the Bank of Montreal. 

Per Google Finance “F&C Asset Management plc (F&C) is an asset management company.   The Company operates in three segments: F&C, F&C REIT and Thames River Capital (TRC). The   Company’s clients are insurance companies, institutional, retail and wholesale investors. The   Company manages portfolios across multiple asset classes on behalf of a range of clients including   insurance funds, pension schemes, public authorities and charities as well as private individuals   through savings schemes, investment trusts and mutual funds.”  


Alliance Trust Position

Elliott also added to its stake in London listed Alliance Trust (LON: ATST), taking its holding from 5% of voting rights to 10.02%. 

Per Google Finance – “Alliance Trust PLC is a self-managed investment trust. The Company’s   objective is to be a core investment for investors seeking increasing value over the long-term. The Company pursues its objective by investing in both quoted and unquoted equities in different sectors and industries; investing internationally in fixed income securities; investing in other asset classes and financial instruments, either directly or through investment vehicles, and investing in subsidiaries and associated businesses.”

Paul Singer's Sohn Conference Presentation: Macro Overview & History of Markets

We're posting up notes from the Ira Sohn Conference 2013 in New York.  Next up is a summary of the presentation from Paul Singer of Elliott Management, a ~$20 billion hedge fund.  He presented a financial overview and talked about quantitative easing and the need for economic growth.


Financial Overview & History of Markets

Singer gave a “history of financial markets since WWII.” There was less debt back then. Sound financial institutions. "Long term entitlement programs are the effective equivalent to debt." Countries are unwilling to even do non-threatening changes to these entitlement programs.

In Japan, it is 800% of GDP. In US, 500% of GDP. "Obligations that cannot possibly be met, no matter what the tax rate, or the growth rate." Financial institutions are now doing not just loans, but they are doing a lot of principal trading. Typical bank now: 200B equity, 2- 3T of assets, and 50-80T of notional value of derivatives. He claims it is hard or impossible to know what those derivatives actually are. Still completely opaque, and their risks are not understandable. VAR totally misstates risks. Also highly levered.

"Central Banks have reveled in their role, flooding the market with money, they think printing money is 'free' and they don't see the cost- since there is no inflation." We have modest growth, and build-up of risk. "The world needs growth; from innovation." Quantitative easing has caused a distorted recovery. People owning bonds, stocks, is doing fine. Ordinary citizens are not feeling the effective equivalent of Dow 15,000. Causing class warfare.

His idea: Those who own long-term bonds of US Governments or others, own things that are not priced correctly. There is no safe haven in these markets. There is no such thing.


Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.

Elliott Associates Discloses General Growth Properties (GGP) Stake

Paul Singer's hedge fund Elliott Associates has filed a 13G with the SEC in regards to shares of General Growth Properties (GGP). The disclosure was made due to activity on March 9th and they now show a 5.3% ownership stake in the company with 16,738,695 shares. This aggregate beneficial ownership includes various investment entities and subsidiaries of Elliott. The overwhelming majority of their position is via common stock while 103,695 shares are via convertible notes.

Elliott Management was founded by Paul Singer back in 1977 and managers over $12 billion today, typically focusing on distressed assets. Our additional coverage of Elliott Management's Paul Singer includes his recent insight at a hedge fund panel and his previous thoughts at the Ira Sohn conference.

Elliott's entrance into GGP means that yet another prominent investor is bullish on the company's prospects as it emerges from bankruptcy. Other notable investors that have sizable stakes in General Growth Properties (GGP) include Bill Ackman's hedge fund Pershing Square, Whitney Tilson's T2 Partners, and Bruce Berkowitz's Fairholme Fund.

Taken from Google Finance, General Growth Properties is "a self-managed real estate investment trust (REIT). The Company has ownership interest in, or management responsibility for, over 200 regional shopping malls in 43 states, as well as ownership in master planned communities and commercial office buildings. GGP’s business is focused in two main areas: Retail and Other."

To see what other stocks hedge funds are taking large positions in, head to Goldman Sachs' VIP list and the hedge fund generals list.

Hedge Fund Panel: Global Investment Landscape In 2010 (Druckenmiller, Singer, Dimitrijevic)

Yesterday, there was an introductory post that outlined key takeaways from the event. Then there was also a separate post that detailed the "Case For Global Equities in 2010" from a panel of prominent long/short equity hedge fund managers. The next panel discussed the Global Investment Landscape In 2010. Hedgies in this discussion included Duquesne Capital's Stanley Druckenmiller, Elliott Management's Paul Singer, and Everest Capital's Marko Dimitrijevic.

The Global Investment Landscape In 2010: The government's role, the global landscape, and monetary policy.


Paul Singer (Elliott Management): Singer talked about how government has always been a part of investing, but even more so now. He says that capital will flow to wherever it is welcome and wherever there are defined rules and laws. Singer honed in on some particular legislation that he feels will have damaging impacts. He focused on the Wall Street Reform and Consumer Protection Act of 2009. This would charge banks over $75 billion and hedge funds over $10 billion in open-ended assessment. He wonders why hedge funds would have to pay for the mistakes of 'highly levered and "mis-managed financial institutions'.

He also lashes out at the notion that this legislation designates institutions that are 'too big to fail'. He wonders how the government could identify those institutions ahead of time? Rather than forcing this definition on a few select companies, why not focus on making all of them NOT too big to fail. He thinks the way to do this is via margin requirements and regulations. Singer almost led a "call to arms" with his talk as his main point was that leaving capitalists worried about future punishment isn't the way to fix the system. On the topic of emerging markets, Singer actually thinks there is a "fair race" between the developed world and emerging markets going forward. Last year, we also covered Singer's thoughts at the Ira Sohn Investment Conference.


Stanley Druckenmiller (Duquesne Capital): Druckenmiller focused on monetary policy and asserted that it is not responsible for the financial crisis. He notes that zero and/or negative interest rates often cause dislocations that don't have anything to do with inflation. Instead, they affect other factors by discouraging saving, encouraging spending, and causing financial institutions to lever-up even more.

Druckenmiller did admit that cutting rates was appropriate as it truly was an emergency, but thinks an increase in rates is past due. (He disagrees with the assertion that low rates are needed for growth). Druckenmiller's thoughts overall could be summed up as bearish. In terms of investing, he mentioned that emerging markets offered much better balance sheets and faster growth. At the same time, he notes that the US dollar is the reserve currency and so monetary policy outside of America becomes less meaningful. We haven't covered Druckenmiller on the site much, but in the past have noted that he was on Forbes' billionaire list.


Marko Dimitrijevic (Everest Capital): Dimitrijevic focused on his niche topic of emerging markets and said they represent almost 13% of the MSCI index. He points out that this figure is misleading since nominally, emerging markets are a third of world assets. Additionally, emerging markets surged past developed markets on a purchasing power parity basis for the first time ever. One of Dimitrijevic's most intriguing points was the notion that the emerging market consumer overtook the US consumer and this shift seems to be overlooked. For more on Dimitrijevic, we've previously profiled Everest Capital.


This wraps up the "Global Investment Landscape In 2010" conversation. Head to the overview of the hedge fund panel and also coverage of the long/short equity panel. Check back tomorrow for summaries of the rest of the panels.