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Elliott Management's 'Gut Tells' Them Global Stocks Might Lose 50% In Value From February Levels

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Elliott Management's 'Gut Tells' Them Global Stocks Might Lose 50% In Value From February Levels

New York-based hedge fund founder and CEO Paul Singer believes that amid the COVID-19 outburst, stocks across the world might see a value erosion from its February high levels.

What Happened

"A 50% or deeper decline from the February peak levels might be the ultimate path of global stock markets", CNBC reported as Elliott said in a letter to its clients.

U.S. Benchmark Index S&P 500 reversed its losing streak and recorded a surge of 27.7% (as of Apr 16) in the past four weeks. On Mar 23, the index had stumbled to its 52-week low of 2,191.86 from its 52-week high levels recorded on Feb 19.

With world economies struggling to scale out of the recession caused by the coronavirus outbreak, gold and credit investments are believed to be safe-haven investments. Gold price is currently at $1,709.55 per ounce.

Elliott's Steps

For the first quarter, Elliott International fund and Elliott associates expanded by 2.2% and 1.65 respectively despite a cautious portfolio with protection trades on credit, equities, rates and gold, Hedge Fund Research data showed.

For the same period, a loss of around 8% was posted, led by declines in distressed debt and equity trades.

The fund's portfolio managers said that despite their recent purchases of some stocks and bonds, the market does not seem favorable. "To us, there does not appear to be a gilded cornucopia of shining bargains," the letter said.

It believes that routine instruments like requests for share buybacks might not be accepted for companies to survive; instead, there may be a chance of strategic M&A.
Elliott is also an activist investor in many companies, few being eBay Inc. (NASDAQ: EBAY), Peabody Energy Corp. (NYSE: BTU) and Twitter Inc. (NYSE: TWTR).

 

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