Why Elliott Management Might Be in Trouble

Last week, Paul Singer’s Elliott Management filed its 13F for the first quarter of 2020. In the last quarter, Elliott Management’s AUM was worth around $73.15 billion. IT stocks accounted for 23.5% of the hedge fund’s total portfolio of publicly traded securities. Industrial and finance stocks were the hedge fund’s next biggest holdings. These sectors accounted for 21.4% and 15.2%, respectively, of Elliott’s portfolio.

At the end of the first quarter of 2020, Elliott Management’s top buys were the iShares iBoxx $ Investment Grade Corp Bond ETF (NYSEARCA:LQD), the iShares iBoxx $ High Yield Corp Bond ETF (NYSEARCA:HYG) call options, the Energy Select Sector SPDR ETF (NYSEARCA:XLE) call options, and Tesla PRN and Dropbox put options.

Accumulating XLE call options might have impacted Elliott’s return in the second quarter of 2020. In April, WTI crude oil prices turned negative. As a result, the entire energy sector’s stock prices collapsed.

Also, Elliott’s top five sells included XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP) put options. XOP has a higher exposure to US oil and gas stocks than XLE. Integrated energy stocks, midstream stocks, and refiners are XLE’s important constituents.

Elliott’s top sells include Vanguard Real Estate Index Fund ETF Shares (NYSEARCA:VNQ) put options and the Invesco QQQ Trust put options. The hedge fund reduced its put options at a time when stock prices entered a downturn. The S&P 500 Index has declined over 9% on a year-to-date basis.

Howmet Aerospace accounted for 12.4% of Elliott’s total portfolio of publicly traded securities. The company is the hedge fund’s largest holding. On a year-to-date basis, Howmet Aerospace has fallen 54.3%. Among the sectors, the aviation industry has been impacted the most due to the COVID-19 outbreak. Even after allowing economic activities, governments across the globe will curb flight movement to contain the coronavirus, which will impact the aerospace industry in the future.

Elliott’s other top holdings include Dell Technologies, LQD, HYG call options, and VNQ put options. These securities accounted for around 11%, 7.9%, 5.7%, and 5.7%, respectively, of Elliott’s total portfolio of publicly traded securities. Dell call options also accounted for around 3.7% of Elliott’s total portfolio.

Last year, Elliott Management acquired a significant stake in AT&T. In the first quarter of 2020, Elliott Management’s exposure to AT&T didn’t change on a sequential basis. Read Will AT&T and Elliott Management Find Common Ground? to learn more.