By: Aubrey Tabuga
Paulson & Co. Inc. is an employee-owned hedge fund based in New York City. It was founded by John Paulson and was the world's fourth-largest hedge fund in 2011. John Paulson is known worldwide as the fund manager who had made $15 billion in a single year by betting against the real estate bubble in 2007. He had earned a place alongside George Soros and Warren Buffett when he made more than $1 billion in a matter of days.
Paulson had $12.7 billion under its charge as of the end of September. The hedge fund had bought 8 new stocks, increased its stake in 10, and sold 8 out. The big buys of Paulson in the latest quarter were Life Technologies Corporation (LIFE), Equinix, Inc. (NASDAQ:EQIX), MetroPCS Communications, Inc. (PCS), Nexen Inc. (NXY), and Shire Plc (NASDAQ:SHPG).
% of Portfolio
Change in Shares
EPS growth next 5Y
Life Technologies Corporation
MetroPCS Communications, Inc.
Sources: whalewisdom.com & finviz.com; as of Nov. 19, 2012
Life Technologies Corporation
Paulson nearly tripled its stake in Life Technologies (LIFE) in the latest quarter. The hedge fund manager bought a whooping 8.5 million shares bringing its holding to 13.5 million or 5.19% of its total portfolio. Paulson initiated its position in the Carlsbad-based company in the second quarter of 2011.
Life Technologies is a global life sciences company. Its business is segmented into Molecular Biology Systems, Cell Systems division, and Genetic Systems. It recently announced the launch of Applied Biosystems QuantStudio™ Dx Real-Time PCR Instrument for use in Europe. This product aimed at meeting the specific needs of diagnostic laboratories. The company had just recently acquired Advance Microscopy Group, a developer of imaging systems for microscopy.
The company had a history of remarkable sales growth. In fact, within the last 5 years, its sales grew at an annual rate of 26.81%. The earnings prospect is encouraging with a long term annual growth estimate of 9.96%. Investors, therefore, can look forward to a higher EPS next year compared to the current one. With its profit margin at over 10% and robust stock performance, there is no wonder that investors like Paulson are lured to invest in this firm.
The hedge fund had doubled its shares in Equinix (EQIX) in the third quarter. The stake had constituted 3.40% of Paulson's total holdings equivalent to approximately $432 million. The first time the company appeared in the 13F Filing of Paulson was in the second quarter in the current year.
Equinix is a provider of data center services to financial companies, enterprises, and network and content providers in the US and many other countries. Through data centers, the company protects clients' information assets and connects businesses with customers and partners. Equinix had just exhibited yet another strong quarter and had shown indications for continued growth next year. The Redwood City, California-based company saw its revenues swell by 20% from that in the same period last year.
Data show that this company is a remarkable growth producer. The stock price had leaped by 76.42% from that in the previous year. The sales of the company have grown by 41.14 percent annually in the last 5 years. The earnings potential is outstanding as it is expected to grow by 25.12% for each year in the next 5 years. In fact, EPS had grown in the year by a huge 109.34%. Clearly, Equinix is a powerful addition to one's investment portfolio.
MetroPCS Communications, Inc.
Paulson bought a whooping 23.8 million new shares of the company in the latest quarter. This is the first time that Paulson bought a position in PCS within at least the last couple of years. The stake formed a significant 2.19% of Paulson's total portfolio.
MetroPCS Communications, Inc. (PCS) is a wireless telecommunications carrier based in Richardson, Texas. The provider of wireless broadband mobile services in the US had just beaten the latest quarter estimates by posing a 5% and 177% growth in revenue and earnings, respectively. The company, whose business model gears towards the prepaid market, had announced its plan to merge operations with T-Mobile.
Despite a rather dismal EPS expectation for the next year, at -22.77%, PCS is in for high earnings in the long term with the annual growth estimate to be approximately 13.24%. The stock price is improving robustly. It had already risen by 23.96% from that of last year. Also, the company's profit margin is 6.61%.
Paulson bought 6.050 million new shares of Nexen (NXY) at the end of the third quarter. This is the first time that the company made it to the hedge fund's 13F Filing within at least the last couple of years. The shares had formed 1.21% of Paulson's total holdings. Nexen, operating as an independent energy company, explores and produces crude oil and gas; and develops synthetic crude oil and unconventional gas.
TheStreet Ratings had reiterated a few days ago a hold for the Canada-based company with a C+ ratings score. Despite exhibiting a revenue growth that outpaced the industry, this growth was not adequate to affect earnings positively. Hence, the EPS suffered a decline. In the mean time, we are yet to see the successful takeover of CNOOC, China's top offshore oil and gas producer, on this Canadian company since it is still under review by authorities. CNOOC had bid $15.1 billion in acquiring Nexen. This is China's would-be biggest-ever overseas acquisition.
Nexen stock is in for a sharp rise based on the year-to-date performance of 62.06%. Earnings are expected to balloon next year at a rate of 33.60%. In the long term, investors can somewhat expect a 15.00% annual growth in EPS. The company's profit margin is 5.69%. With the CNOOC acquisition looming ahead, this company is an interesting one to follow.
Paulson bought 1.37 million new shares in the latest quarter. This is the first time that the company made it to the hedge fund's 13F Filing within at least 9 quarters. The stake had formed 0.96% of the hedge fund's total holdings.
Shire Plc (SHPG) is a biopharmaceutical company whose business is in specialty pharmaceuticals, human genetic therapies, and regenerative medicine. The Dublin-based company had recently shown increased revenues and earnings, but missed consensus estimates due to lower revenues. Earnings per American Depositary Share (ADS) of $1.36 are higher than that for the previous year at $1.28. The revenues have also inched a bit from $1.09 billion to $1.10 billion. However, the expected EPS and revenues are $1.44 and $1.163 billion, respectively. Foreign exchange movements have negatively affected the company's third quarter sales by $28 million.
The company had just announced its initiative - the Shire Rare Disease Impact Report. Under this, Shire will be conducting research on the impact of rare diseases in patient and medical communities. Surveys are currently underway; its results will be released in the first half of 2013. The company has been providing increasing dividends since 2004. The annualized dividend has been rising by approximately 14 percent per year in the last 5 years. Moreover, one of the company's main drawers is its high profit margin of 20.65%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Aubrey Tabuga, one of our equity researchers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.