Paul Singer is the brain behind Elliot Management, one of the oldest hedge funds with over $50 billion in assets under management. The hedge fund started investing in convertible bonds and arbitrage before branching into distressed investing.
A change of focus into activism is what has propelled the hedge fund to great heights, making Singer one of the most feared and respected in corporate America. Last year alone, the hedge fund is believed to have gained 5.9% as the overall market turned bearish and the S&P 500 fell 19%. The impressive performance stems from Singer's aggressive investment strategies that tend to outperform the overall market.
Having started Elliot management in 1977, Singer has been consistently successful thanks to his focus on underperforming companies, where he pushes for changes to improve their performance and value. His average annual return of 14% explains why he is one of the revered hedge fund managers. He has embedded his name on Wall Street as a successful activist investor who takes stakes in struggling businesses and pushes for changes, hoping to lift their share price and fat returns.
Born and raised in New Jersey, Singer is credited as one of the people who accurately predicted the financial crisis of 2008. Even as the market was downturned, the activist investor made a fortune from credit default swaps that bet on leveraged companies.
Long Term Returns of Paul Singer's Activist Targets
Paul Singer of Elliott Management
The Wall Street titan is best remembered for warring with the Argentinian government in a 15-year legal campaign over lapsed debt payments. The result was the seizure of an Argentinian ship. The matter was settled in Elliot receiving a payout of $2.4 billion even as other bondholders settled for pennies. The settlement underscores Elliot Management as one of Wall Street's most feared funds.
Singer has carried out successful activist plays on Wall Street, with the most recent including Twitter, AT&T Inc. (NYSE:T), PayPal Holdings, Inc. (NASDAQ:PYPL), and Samsung. The activist investor has also made a multi-million dollar investment in Salesforce, Inc. (NYSE:CRM), joining Starboard Value, another activist investor who insists the software company is suffering from a valuation discount. In addition to activism, Singer is also active in buyouts, distressed debt, real estate, and commodities.
Our Methodology
We have compiled some of the biggest activist campaigns initiated by Paul Singer's hedge fund over the past few years and compared the stock performance of these targets of Singer with the returns with the S&P 500.
Long-Term Returns of Paul Singer's Activist Targets
Juniper Networks, Inc. (NYSE:JNPR) is a firm specializing in the design, development, and sale of network-related products and services. The company offers routing products to deploy high bandwidth services.
Activist investor Elliott Management took a 6.2% stake in the company in 2014 and started pushing the company to return value to shareholders through stock repurchases while also conducting cost alignment.
The activist investor wanted the company to launch a $3.5 billion stock repurchase, reduce expenses by $200 million, and focus on areas with clear competencies. Juniper Networks, Inc. (NYSE:JNPR) agreed to appoint two independent directors approved by the activist investor.
The activist investor would turn up the pressure in 2020, insisting that the company was undervalued and has been stuck in a sideways range. It consequently pushed the company to refocus on the core business of routers and switches for mobile network providers.
12. The Interpublic Group of Companies, Inc. (NYSE:IPG)
Activist Investment: 2014
Long-Term Returns Since Singer's Investment: 20%
S&P 500 Gain Since Singer's Investment: 26%
The Interpublic Group of Companies, Inc. (NYSE:IPG) offers advertising and marketing services on a global scale. It operates in three segments: Media, Data, and engagement Solutions, Integrated Advertising and Creativity Led Solutions, and Specialized Communications and experiential Solutions.
Elliott Management first targeted the company in 2014 by confirming a 6.7% stake and started agitating for the sale of the business to one of its competitors. However, no deal ever materialized. In 2015, Elliott was awarded two board seats to avert a potential proxy fight, and the company agreed to return $2.3 billion to shareholders through dividends and share repurchases.
By 2017, Elliott Management had exited its position in The Interpublic Group of Companies, Inc. (NYSE:IPG) after registering a 20% gain on its investment in the company.
Alcoa Corporation (NYSE: AA), along with its subsidiary companies, manufactures and markets bauxite, alumina, and aluminum products. The company is involved in bauxite mining, refining bauxite into alumina, and supplying it to customers for the production of various industrial chemical products.
Elliot Management confirmed a 6.5% stake in the bauxite miner in 2015 while insisting that the company was undervalued. The activist investor started pushing for strategic options aimed at maximizing shareholder value. A push to sell one of the company's power generation units was one of the options considered by the investor.
The drive for this move followed Alcoa Corporation's (NYSE: AA) announcement of its intention to divide into two publicly traded companies. Elliott was supportive of the management push to spinoff, insisting it was engaged in friendly dialogue.
Elliot Management boosted its stake in the company to 7.4% in 2016 in anticipation of its split. The split was completed in 2016. However, in 2018, the hedge fund trimmed its stakes in Alcoa Corporation (NYSE:AA) by two-thirds after George Soros's fund exited.
Boyd Gaming Corporation (NYSE:BYD) is a diversified gaming company that operates across multiple regions through three segments: Las Vegas Locals, Downtown Las Vegas, and Midwest & South. The company also owns and runs a travel agency.
Elliott Management disclosed a 4.9% stake in the company in 2016 and sent a letter to the board urging them to focus on improving operational efficiency, capital allocation, and governance. In a bid to avert a potential proxy fight, Boyd Gaming Corporation (NYSE:BYD) agreed to a series of initiatives, including appointing two new independent directors, one nominated by the activist investor.
Boyd Gaming Corporation (NYSE:BYD) also launched a $500 million share repurchase program and agreed to a cost reduction plan while conducting a strategic review of the business.
Akamai Technologies, Inc. (NASDAQ:AKAM) is a company that provides cloud services for securing, delivering, and computing content. It offers cloud solutions for keeping infrastructure website applications and programming interfaces. Activist investor Singer took a 6.5% stake in the cloud computing company in 2017, sending the shares 13% higher.
With the investment, the activist investor confirmed plans to engage the management to consider strategic options for unlocking value, including a possible sale. In regulatory filings, the activist investor reiterated that Akamai Technologies, Inc. (NASDAQ:AKAM) possesses an unmatched network platform that provides a competitive advantage. Still, the value is not reflected in the market value.
Consequently, Elliot started agitating for management changes; board composition changes, and capital or corporate structure improvement. A year later, management of Akamai Technologies, Inc. (NASDAQ:AKAM) would bow to pressure, agreeing to install two activist-backed directors on the board.
Akamai Technologies, Inc. (NASDAQ:AKAM) also agreed to hike its stock buyback program to $750 million and target a higher operating margin goal of 30% by 2020. The company also started a strategic review process that could ultimately lead to the sale of the company.
Pediatrix Medical Group, Inc. (NYSE:MD), formally Mednax, offers newborn maternal, fetal, pediatric, cardiology, and other pediatric subspecialty care services. Hedge fund Elliott Management first took a 7% stake in the small American healthcare company in 2017 and asked the board to consider a sale of the company.
In its regulatory filing, the activist investor insisted that Pediatrix Medical Group, Inc. (NYSE:MD) was highly undervalued and in need of strategic options to maximize shareholder value. Among the options the investor asked the board to consider included the sale of certain businesses or assets and the company as a whole.
In 2020, the provider of maternal-fetal newborn care reached an agreement to sell its Radiology Solutions unit for $885 million.
7. Roadrunner Transportation Systems, Inc. (NYSE:RRTS)
Activist Investment: 2017
Long-Term Returns Since Singer's Investment: -96%
S&P 500 Gain Since Singer's Investment: 61%
Roadrunner Transportation Systems, Inc. (NYSE:RRTS) is a company that provides asset-right transportation and asset-light logistics services. The company offers domestic freight management solutions, including asset-backed truckload brokerage and specialized/heavy haul.
The company was first targeted by activist investor Singer in 2017, disclosing an 8.6% stake in the company. The stakes had risen to 90% by 2019 after a rights offering. The activist now had complete control of the troubled trucking company and could dictate any decisions without engaging in any proxy fight.
Roadrunner Transportation Systems, Inc. (NYSE:RRTS) has imploded catastrophically, down by about 97% from when Elliott's management took a position.
Together with its subsidiary, NRG Energy, Inc. (NYSE:NRG) operates an integrated power company. The company produces and sells electricity and other related products and services to residential, commercial, industrial, and wholesale customers. The company's stock popped by 9% in 2017 after hedge fund titan Paul Singer said it had partnered with Bluescape Energy Partners to push for changes at the integrated power company.
The two owned a combined 9.4% stake in the company, having built the position in the previous year. The activist investor started pushing for management changes with slots on the NRG Energy, Inc. (NYSE:NRG) board. The push came amid concerns that the stock was highly undervalued.
Singer's activist campaigns paid off by July; the company announced a transformation plan to reduce the debt load and free up billions of dollars for strategic purchases and shareholders' payouts. The activist investor also secured a position on the board.
After going slow on the company for years, Singer is yet again on its neck, insisting that it regressed from its initial progress and shareholder enthusiasm in 2017. After reducing its stake to below the regulatory reporting requirements, the hedge fund has upped its stake by $1 billion, representing 13% interest. The fund has started criticizing the company's acquisition of Vivint Smart Home. NRG Energy, Inc. (NYSE:NRG) has also been forced to refresh its board and boost share buybacks amid activist pressure.
