Paul Singer (Trades, Portfolio), founder of Elliott Management, disclosed around Feb. 15 his top five buys for fourth-quarter 2018 were Dell Technologies Inc. (DELL, Financial), Roan Resources Inc. (ROAN, Financial), Transocean Ltd (RIG, Financial), Acadia Healthcare Co. Inc. (ACHC, Financial) and Zayo Group Holdings Inc. (ZAYO, Financial).
Managing a portfolio of 75 stocks, Singer is well known for taking an activist stance in underperforming companies and for buying sovereign debt at a discount. According to current portfolio statistics, Singer’s top three sectors in terms of portfolio weight are utilities, energy and technology.
Dell Technologies
Singer disclosed a 6,626,674-share stake in Dell Technologies, giving the stake 2.37% equity portfolio space. Shares averaged $44.33 during the quarter.
On Dec. 28, 2018, Dell Technologies announced it had completed its transaction to issue 149,387,617 Class C shares for $14 billion in connection with the Dell-VMWare Tracking Stock (DVMT) Class V transaction, which enabled DELL to begin trading on the New York Stock Exchange. Class V shareholders had the option to receive either $120 in cash or 1.8066 shares of Class C common stock per share held.
Dell Chairman and CEO Michael Dell (Trades, Portfolio) said in a statement the world is “undergoing a digital transformation” that is expected to change our daily lives. Dell said the decision to go public was intended to align stakeholder interest to the company’s integrated innovations and unlock shareholder value through the company’s family of businesses.
Other gurus with holdings in Dell Technologies include Jeremy Grantham (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and fellow activist investor Carl Icahn (Trades, Portfolio).
Roan Resources
Singer invested in 15,794,132 shares of Roan Resources for an average price of $13.50 per share, giving the stake 0.97% equity portfolio weight.
Oklahoma City-based Roan Resources engages in the development, exploration and acquisition of unconventional oil and natural gas reserves in the Merge, SCOOP and STACK plays of the Anadarko Basin. The company announced on Feb. 19 that production for the quarter ending December 2018 is expected to meet the guidance range of 54,100 barrels of oil equivalent per day, representing a quarter-over-quarter increase of 17%.
GuruFocus ranks the company’s profitability 5 out of 10: although its Joel Greenblatt (Trades, Portfolio) return on capital outperforms 79% of global competitors, Roan Resources’ gross profit margin has declined approximately 7.3% per year over the past five years.
Diamond Hill Capital (Trades, Portfolio) also invested in Roan Resources during the quarter.
Transocean
Singer invested in 14,928,064 shares of Transocean for an average price of $10.04 per share, giving the position 0.76% equity portfolio space.
Transocean provides offshore contract drilling services for oil and gas wells. The Swiss petroleum drilling company’s business activities include contracting drilling rigs and related equipment.
GuruFocus ranks the company’s profitability 5 out of 10: although the Piotroski F-score ranks a solid 5 out of 9, Transocean’s operating margins have declined over the past five years and are underperforming 88% of global competitors. Other warning signs include declining revenues and an Altman Z-score that suggests possible financial distress.
Acadia Healthcare
Singer invested in 3.25 million shares of Acadia Healthcare for an average price of $34.39 per share, giving the position 0.61% portfolio weight.
The Franklin, Tennessee-based company acquires and develops behavioral health care facilities in the U.S., the U.K. and Puerto Rico. GuruFocus ranks the company’s profitability 8 out of 10: Acadia Healthcare’s operating margin is still near a 10-year high of 16.24% and outperforms 73% of global competitors despite contracting 1.9% per year over the past five years. Additionally, the company’s three-year revenue growth rate of 21.50% outperforms 89% of global medical care companies.
Zayo Group
Singer invested in 935,523 shares of Zayo Group for an average price of $27.12 per share, giving the holding 0.16% equity portfolio space.
The Boulder, Colorado-based company provides a wide variety of fiber-based communications infrastructure solutions, including leased dark fiber, fiber to cellular towers, dedicated wavelength connections and Ethernet offerings. GuruFocus ranks the company’s profitability 9 out of 10 on several positive signs, which include expanding profit margins and a strong Piotroski F-score of 7. Zayo’s operating margin has increased approximately 18% per year over the past five years and is outperforming over 88% of global communication equipment companies.
Disclosure: No positions.
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