Paul Singer Hedges His Portfolio against a Recession


Sep. 13 2019, Published 11:25 a.m. ET

Paul Singer, a legendary hedge fund manager, is the founder & CEO of Elliott Management. He’s well-known in the market because of his fund management strategy. Singer is also famous for his distressed debt acquisition strategies. Recently, Elliott Management was in the news after it disclosed $3.2 billion worth of stake in AT&T (T). The firm expects a significant upside in AT&T’s stock prices.

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Top buys

Paul Singer changed his firm’s portfolio some in the last quarter. Among his various buys in the second quarter, the iShares iBoxx $ High Yield Corporate Bond ETF call option contracts, the Invesco QQQ Trust (QQQ) put option contracts, the Energy Select Sector SPDR Fund put option contracts, the Health Care Select Sector SPDR Fund put option contracts, and Marathon Petroleum were his top five buys. The firm increased its holdings in these securities by 3.5%, 3.15%, 2.13%, 1.99%, and 1.72%, respectively, in the second quarter. Except for the Invesco QQQ Trust (QQQ) put option, all of the above securities were firm’s fresh buys in the second quarter.

Top holdings

Elliott Management’s top five holdings in the second quarter were QQQ put option contracts, Arconic, FirstEnergy, Hess, and Peabody Energy. These securities represent nearly 11.87%, 8.98%, 7.18%, 6.92%, and 4.55%, respectively, of the firm’s portfolio in the second quarter.

In the last quarter, the firm’s investment in QQQ put options rose significantly. Also, Paul Singer liquidated most of the holdings in QQQ call options. He might not be too optimistic about high growth technology stocks and consumer cyclical stocks. Technology stocks and consumer cyclical stocks usually perform well when the business cycle in the economy picks up. The firm increased Apple stocks’ put option contracts 343% on a sequential basis. Apple has risen 41.4% year-to-date.

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Paul Singer’s hedging a possible recession

QQQ mainly tracks the performance of high growth technology stocks and consumer cyclical stocks. Notably, QQQ returned 91% over the last five years. On a year-to-date basis, QQQ has returned 28.6%. Paul Singer increased his holdings in QQQ put option contracts by 22%. He reduced his holdings in QQQ call option contracts by 60% on a sequential basis. Singer might be using the strategy to hedge his portfolio due to recession risks.

The aging population is one of the main reasons behind the global slowdown. The escalating trade war impacted business investment decisions and raised recession fears. In the current economic environment, the aging population in major developed nations became a concern for most of the central banks in their decision-making process. Investors should keep an eye on central banks’ policies.

Paul Singer’s top sells

Elliott Management’s top five sells in the second quarter were Sempra Energy, QQQ call option contracts, Altaba, the iShares U.S. Real Estate ETF put option contracts, and Hess. The firm reduced its holdings in these securities by 8.95%, 4.69%, 1.77%, 1.36%, and 1.36%, respectively.


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