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This article is first in a series that provides an ongoing analysis of the changes made to John Paulson's U.S. stock portfolio on a quarterly basis. It is based on Paulson's regulatory 13F Form filed on 08/14/2013. John Paulson founded Paulson & Company in 1994 and during the first decade generated good absolute returns with low correlation to the overall market. Since then, he has expanded into other areas. Assets Under Management (AUM) has grown from around $2M at inception to over $18B as of EOY 2012. John Paulson is best known for his highly leveraged bets against the real-estate bubble that were first established in 2004. In 2007, those bets paid off as the firm generated $15B in profits. To read more on that story, check out "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History". His investing style has shifted a lot over the years: the firm now has several types of funds focused in different areas. Even though it is very difficult to continue performing when assets are spread-out, his amazing winning streak continued through 2010. The funds however lost money the last couple of years.

This quarter, Paulson's U.S. long portfolio decreased from $17.72B to $14.18B, a drop of 20%. There are 91 13F securities in the portfolio although only 49 of them are significantly large holdings (more than 0.5% of the U.S. long portfolio). The top five holdings represent just over 30% of the U.S. long assets. The largest holding is Sprint Nextel (NYSE:S) at 9.9% followed by SPDR Gold Trust (NYSEARCA:GLD) at 8.6%. This is quite a shift from last quarter when GLD was by far the largest position at 19.03%.

Stake Disposals:

Capital One Financial (NYSE:COF) & Warrants: COF was a small position (2M shares) first purchased in Q1 2009. The stake was increased to 17M shares in Q2 2009 at prices between $13.82 and $31.34. The position was since reduced to 0.68% of the U.S. long portfolio as of last quarter at much higher prices. This quarter, the position was eliminated at prices between $52.75 and $63. The stock currently trades just outside that range at $66.59. The stake elimination represents a bearish bias.

Scripps Networks (NYSE:SNI) & Wells Fargo (NYSE:WFC): SNI and WFC are very small positions (less than 1% of the U.S. long portfolio) that were eliminated this quarter. WFC was a large 6.5% position as of 2010 but was reduced drastically in 2011. SNI position was established in 2011 but was reduced to roughly half by Q2 2012 and since then had been kept steady. As the stakes were minor, the eliminations do not indicate a clear bias.

New Stakes:

Thermo Fisher Scientific (NYSE:TMO): TMO is a 3.41% of the U.S. long portfolio stake established this quarter at prices between $75.53 and $88.76. The stock currently trades outside that range at $90.32. The substantial stake establishment indicates a clear bullish bias.

Smithfield Foods (NYSE:SFD), Cooper Tire & Rubber (NYSE:CTB), & Kodiak Oil & Gas (NYSE:KOG): SFD, CTB, and KOG are small ~1% positions established this quarter. SFD position was purchased at prices between $25.44 and $33.35 and the stock currently trades at $33.43. CTB position was purchased at prices between $23.25 and $34.66 and the stock currently trades at $32.46. KOG position was purchased at prices between $7.47 and $9.60 and the stock currently trades at $9.63. The stake establishments indicate a mild bullish bias.

Belo Corporation (NYSE:BLC), Rue21 Inc. (NASDAQ:RUE), & William Lyon Homes (NYSE:WLH): BLC, RUE, and WLH are very small (between 0.50% and 0.70%) positions established this quarter. As the positions sizes are very small, the stake establishments do not indicate a clear bias.

Stake Decreases:

SPDR Gold Trust & Sprint Nextel : GLD & S are Paulson's largest positions. The huge 19.03% GLD position was reduced by more than half this quarter to a 9.90% position at prices between $116 and $155. The original stake was established in Q1 2009 at prices between $82.71 and $97.80. It was reduced by ~45% in 2011 at much higher prices and since then had been kept relatively steady. The large stake reduction this quarter indicates a clear bearish bias. The S stake was established in Q4 2012 and doubled last quarter. This quarter, the stance reversed as the position was reduced by ~15%. S was a risk-arbitrage position established due to Softbank's acquisition. As such, the activity does not indicate a clear bias.

Delphi Automotive (NYSE:DLPH): DLPH position was reduced to a very small 0.57% of the U.S. long portfolio position this quarter at prices between $40.94 and $52.09. The position was established in 2011 as a result of conversion of Delphi Automotive debt to equity (at ~67c per share) as the firm emerged from bankruptcy. Paulson started harvesting the outsized gains from this position in Q1 2012 and the pattern continues this quarter.

Life Technologies (NASDAQ:LIFE): LIFE position was established in 2011. The bulk of the stake was purchased in Q3 2012 at prices between $42.47 and $49. Paulson had huge gains from this timely purchase and harvested most of it this quarter at prices between $64.63 and $75.

MGM Resorts (NYSE:MGM): MGM was a huge position established in Q2 2010 at prices between $9.48 and $15.89. It was reduced by ~30% in 2011 and since then had been kept relatively steady. This quarter saw a ~10% trimming at prices between $12.06 and $15.86. The stock currently trades outside that range at $17.30. Paulson is starting to harvest long-term capital gains from this position.

Mylan Inc. (NASDAQ:MYL): The 2.66% MYL stake was reduced by roughly one-third this quarter at prices between $28.70 and $32. The original stake was purchased in Q1 2010 at prices between $17 and $23. The stake was kept relatively steady until last quarter when it was reduced by a quarter at prices between $27.54 and $31. The large stake reduction across multiple quarters indicates a clear bearish bias.

AMC Networks (NASDAQ:AMCX): AMCX is a 2.28% of the U.S. long portfolio stake first established in Q3 2011 at prices between $33 and $37.50. Since then, the position was marginally increased. This quarter saw a reversal as ~20% of the position was disposed of at prices between $60 and $68. Paulson is harvesting large long-term capital gains from this position.

Hartford Financial Services Group (NYSE:HIG): The 1.30% of the U.S. long portfolio HIG position was first purchased in 2009. It was an activist position and Paulson pushed for changes at the company - in Q1 2012, he called to spin-off the P&C business which he argued will increase shareholder value by 60%. He experienced some limited success but is moving on: last quarter the position was reduced by 40% at prices between $22.44 and $26.46 and this quarter, it was further reduced by 45% at prices between $24.82 and $31.43.

Equinix Inc. (NASDAQ:EQIX): EQIX was a small position established in Q2 2012 at prices between $147 and $175 and doubled in Q3 2012 at prices between $165 and $203. It had since been kept steady. This quarter saw a reversal as the position was reduced by half at prices between $176 and $230.

Anglogold Ashanti (NYSE:AU) & Converts (AU-A), Bank of America (NYSE:BAC) WTS, Caesars Entertainment (NASDAQ:CZR), CNO Financial (NYSE:CNO), Grifols S A (NASDAQ:GRFS), Pioneer Natural Resources (NYSE:PXD), & Realogy Holdings (NYSE:RLGY): These medium-sized (1% to 5% of the U.S. long portfolio) positions were reduced marginally this quarter. As the activity was minor, it does not indicate a change in bias.

Randgold (NYSE:RDN), Rock-Tenn Co. (NYSE:RKT), Royal Bank Scotland (NYSE:RBS) & Preferred, & Ryman Hospitality (GET): These are very small positions (less than 1% of the U.S. long portfolio) that were reduced substantially this quarter. The activity indicates a mild bearish bias.

HCA Holdings (NYSE:HCA), Interdigital Inc. (NASDAQ:IDCC), Interoil Corp. (NYSE:IOC), Mead Johnson (NYSE:MJN), MGIC Investment (NYSE:MTG), Novagold (NYSEMKT:NG), Radian Group , & W P Carey (NYSE:WPC): These are very small positions (less than 1% of the U.S. long portfolio) that were reduced marginally this quarter. As the position sizes are very small and the stake reductions are minor, the activity does not indicate a clear bias.

Stake Increases:

Family Dollar Stores (NYSE:FDO): FDO is a 3.27% of the U.S. long portfolio position established last quarter at prices between $54.87 and $64. It was increased by ~50% this quarter at prices between $57.42 and $65.49. The stock currently trades at $71.14. The significant stake increase indicates a clear bullish bias.

Cobalt International Energy (NYSE:CIE): CIE was a minute 0.12% of the U.S. long portfolio stake as of last quarter. The position was increased to a substantial 2.63% stake this quarter at prices between $25 and $29. The stock currently trades below that range at $24.67. The activity represents a bullish bias. For investors attempting to follow Paulson, CIE is a good option to consider for further research.

Cablevision Systems (NYSE:CVC): CVC is a 2.49% of the U.S. long portfolio stake that was first purchased in Q4 2012 at prices between $13.65 and $18.52. Last quarter, the position was increased by around one-third at prices between $13.76 and $15.75. This quarter saw an additional 24% stake increase at prices between $13.93 and $16.82. The stock currently trades at $18.40. The consistent buying across multiple quarters indicates a clear bullish bias.

Hess Corporation (NYSE:HES): HES is a 2.18% of the U.S. long portfolio stake established last quarter at prices between $53 and $73. The position was increased by around 73% this quarter at prices between $62.87 and $74.14. The stock currently trades at $73.72. The stake increase indicates a bullish bias.

Shire PLC ADR (NASDAQ:SHPG): SHPG is a 1.91% of the U.S. long portfolio stake established in Q3 2012 at prices between $85 and $94. It had since been kept steady. This quarter, the position was doubled at prices between $87 and $100. The stock currently trades at $114.

Aetna Inc. (NYSE:AET) & Popular Inc. (NASDAQ:BPOP): These two medium-sized positions were increased marginally this quarter. As such, the activity does not indicate a change in bias.

Gardner Denver (NYSE:GDI), Hillshire Brands (NYSE:HSH), & Vodafone Group (NASDAQ:VOD): These are very small positions (less than 1% of the U.S. long portfolio) that were increased marginally this quarter. As the stake increases are minor and the position sizes are very small, the activity does not indicate a clear bias.

Freeport McMoRan (NYSE:FCX), Plains Exploration & Production, & McMoran Exploration: FCX is a ~3% of the U.S. long portfolio position that increased by just over 70% this quarter. The original position was established in Q4 2012 at prices between $30.81 and $42.43 and had since been kept steady. The stock currently trades at the low-end of that range at $31. The large stake increase was due to the result of Freeport's acquisition of Plains Exploration & Production and McMoran Exploration that closed in the quarter - Paulson held a 3.69% position in PXP and a 1.53% position in MMR, both established in Q4 2012 as risk-arbitrage stakes. For investors attempting to follow Paulson, FCX is a good option to consider for further research.

MetroPCS & T-Mobile USA (NYSE:TMUS): MetroPCS was 2.19% of the U.S. long portfolio established in Q3 2012. The stake was eliminated this quarter as a result of the reverse-merger and IPO transaction with T-Mobile USA. This was a timely purchase for Paulson and he is sitting on large gains.

The only other significantly large (more than 0.5% of the U.S. long portfolio) position is Genworth Financial (NYSE:GNW), a 0.72% stake established last quarter at prices between $9 and $11.50 that remained steady this quarter.

The spreadsheet below highlights changes to Paulson's U.S. stock holdings in Q2 2013:


(Click to enlarge)

Source: Tracking John Paulson's Paulson & Company Portfolio - Q2 2013 Update