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Summary

  • John Paulson’s U.S. long portfolio increased marginally from $20.30B to $20.43B this quarter.
  • Paulson & Company's largest three positions are Extended Stay America, SPDR Gold ETF, and Vodafone Group PLC.
  • Paulson & Co. is bullish on Cobalt International Energy and CBS Corporation. The fund is bearish on Freeport McMoRan Copper & Gold and Hess Corporation.

This article is part of 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 05/15/2014. Please visit our Tracking John Paulson's Paulson & Company Portfolio series to get an idea of his investment philosophy and our previous update highlighting the fund's moves during Q4 2013.

This quarter, Paulson's U.S. long portfolio increased marginally from $20.30B to $20.43B. This is compared to a ~30% spike from $15.52B to $20.30B last quarter, an increase from $14.18B to $15.52B in Q3 2013, and a drop from $17.72B to $14.18B in Q2 2013. There are 80 13F securities in the portfolio, although only 46 of them are significantly large holdings (more than 0.5% of the U.S. long portfolio). The largest holding is Extended Stay America (ESH) at 6.21% of the portfolio.

John Paulson is best known for his highly-leveraged bets against the real-estate bubble that netted him billions in the aftermath. To learn more about that story, check out "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History."

Stake Disposals:

M&T Bank (NYSE:MTB): MTB was a small 0.5% of the U.S. long portfolio position that was eliminated this quarter at prices between $109 and $121. The stock currently trades at $119. The bulk of the position was purchased in Q3 2013 at prices between $110 and $119. Last quarter, the position was reduced by half, and it was followed up by the stake elimination this quarter.

Santarus Inc. (NASDAQ:SNTS): SNTS was a small 0.79% of the U.S. long portfolio position established last quarter at prices between $21 and $31. The disposal this quarter happened as a result of Salix Pharmaceuticals (NASDAQ:SLXP) buying SNTS for $32 per share cash.

New Stakes:

Verizon Communications (NYSE:VZ): VZ is a 2.04% of the U.S. long portfolio position established this quarter as a result of Vodafone's (NASDAQ:VOD) Verizon stake disposal: Paulson held Vodafone stock for which he received 0.26 shares of Verizon stock for each share of Vodafone held. VZ currently trades at $49. Dan Loeb of Third Point and Warren Buffett also established significantly-sized positions in VZ this quarter.

CBS Corporation (NYSE:CBS): CBS is a 1.35% of the U.S. long portfolio position established this quarter at prices between $56.31 and $67.55. The stock currently trades near the low end of that range at $57. For investors attempting to follow Paulson, CBS is a good option to consider for further research. CBS saw some super-investor interest this quarter as David Tepper of Appaloosa also added a similarly sized (as percentage of portfolio) stake.

Dollar General (NYSE:DG) & Valeant Pharmaceuticals (NYSE:VRX): DG & VRX are very small 0.54% & 0.65% of the U.S. long portfolio stakes respectively established this quarter. The DG position was established at prices between $55 and $63, and the stock currently trades at $55.63. The VRX position was established at prices between $112 and $148, and the stock currently trades at $127.

Stake Decreases:

Caesars Acquisition Company (NASDAQ:CACQ): CACQ is a 0.86% of the U.S. long portfolio stake established last quarter and reduced marginally this quarter. Caesars Acquisition is a spin-off from Caesars Entertainment (NASDAQ:CZR) and the terms of the deal allowed existing shareholders to get CACQ shares at $9.43 (rights offering). Paulson probably took this option to establish the position. The stock currently trades at $13.06.

Cablevision Systems (NYSE:CVC): CVC is a 1.59% of the U.S. long portfolio stake that was first purchased in Q4 2012 at prices between $13.65 and $18.52. In Q1 2013, the position was increased by around one-third at prices between $13.76 and $15.75. Q2 2013 saw an additional 24% stake increase at prices between $13.93 and $16.82. This quarter saw an about-turn, as around 8% of the position was sold at prices between $15.85 and $18.15. The stock currently trades at $17.15.

Equinix Inc. (NASDAQ:EQIX): EQIX is a 1.89% of the U.S. long portfolio position first purchased 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. Q2 2013 saw a reversal as the position was reduced by half at prices between $176 and $230. Q3 2013 saw a 20% stake increase at prices between $165 and $203 and that was followed-up with a 74% stake increase last quarter at prices between $155 and $184. This quarter saw a minor stake reduction. The stock currently trades at $195.27. The aggressive stake build-up indicates a clear bullish bias.

Family Dollar Stores (NYSE:FDO): FDO is a large 1.84% of the U.S. long portfolio position established in Q1 2013 at prices between $54.87 and $64. It was increased by ~50% in Q2 2013 at prices between $57.42 and $65.49. Q3 2013 saw further buying as the stake was increased by another ~50% at prices between $62 and $75. The pattern reversed last quarter as ~13% of the position was sold at prices between $63.58 and $72.95. This quarter the selling increased as the position was reduced by one-third at prices between $57 and $67.50. The stock currently trades at $57.46. The about-turn indicates a bearish bias.

Freeport McMoran (NYSE:FCX): FCX is a 1.64% of the U.S. long portfolio position that was increased by just over 70% in Q2 2013. The increase was due to the result of Freeport's acquisition of Plains Exploration & Production (NYSE:PXP) and McMoran Exploration (NYSE:MMR) 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. The original FCX 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 $35. This quarter, the position was reduced by 35% at prices between $30.50 and $38.

Hartford Financial Services Group (NYSE:HIG): The 1.39% of the U.S. long portfolio HIG position was first purchased in 2009. It was an activist stake 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 in Q1 2013, the position was reduced by 40% at prices between $22.44 and $26.46, and the following quarter saw another 45% stake reduction at prices between $24.82 and $31.43. This quarter saw a marginal stake reduction. The stock currently trades at $34.29.

AngloGold Ashanti (NYSE:AU): This 2.33% position was reduced by 11% this quarter at prices between $11.39 and $19.36. The stock currently trades at $16.89. Last quarter also saw a minor stake reduction.

Hess Corporation (NYSE:HES): HES is a 0.71% of the U.S. long portfolio stake established in Q1 2013 at prices between $53 and $73. The position was increased by around 73% in Q2 2013 at prices between $62.87 and $74.14. This quarter saw an about-turn as the position was reduced by ~62% at prices between $73.92 and $83.22. The stock currently trades at $87.40.

Digital Realty (NYSE:DLR): DLR is a small 0.43% of the U.S. long portfolio position established last quarter at prices between $44.53 and $58.25. It was reduced by ~29% this quarter at prices between $49.12 and $54.94. The stock currently trades at $59.33.

Kodiak Oil & Gas (NYSE:KOG): KOG is a 1.54% position purchased in Q2 2013 at prices between $7.47 and $9.60. It was almost doubled in Q3 2013 at prices between $8.42 and $12.06. The stock currently trades at $12.25 and the position saw a marginal stake reduction this quarter. The activity indicates a bullish bias.

Mallinckrodt PLC (NYSE:MNK): MNK is a 1.75% of the U.S. long portfolio position established in Q3 2013 at prices between $42 and $47.20. The stock currently trades at $78.86. Mallinckrodt is a $2.7B business that was spun-off from Covidien PLC (NYSE:COV) on July 1, 2013 (one share of MNK for every eight shares of COV). Paulson took the position soon after - the stake is at just under 10% of the entire business. This quarter saw a minor stake reduction.

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. Q2 2013 saw a ~10% trimming at prices between $12.06 and $15.86. In Q3 2013, the position was reduced further by ~12% at prices between $14.75 and $20.44, and last quarter saw a marginal stake reduction. The stake was reduced by ~18% this quarter at prices between $23.25 and $28.29. The stock currently trades at $23.90, and the remaining position accounts for a still significant 3% of the U.S. long portfolio. Paulson is harvesting long-term capital gains from this position.

Mylan Inc. (NASDAQ:MYL): The 3.40% MYL stake was reduced by roughly one-third in Q2 2013 at prices between $28.70 and $32. The original stake was purchased in Q1 2010 at prices between $17 and $23. The position was kept relatively steady until Q1 2013 when it was reduced by a quarter at prices between $27.54 and $31. It was kept steady last two quarters and this quarter saw a minor trimming. The stock trades currently at around $50.

Pioneer Natural Resources: PXD is a 1.64% of the U.S. long portfolio position that was reduced by 23% last quarter at prices between $179 and $225. This quarter saw further selling as the stake was reduced by another ~20% at prices between $165 and $205. The stock currently trades at $202. The original stake was established in Q4 2012 and doubled in Q1 2013 at prices between $102 and $131. Paulson is harvesting gains from this position.

Thermo Fisher Scientific (NYSE:TMO): TMO is a 2.68% of the U.S. long portfolio stake established in Q2 2013 at prices between $75.53 and $88.76. It was reduced by ~18% last quarter at prices between $90 and $111 and another 3% this quarter at prices between $109 and $127. The stock currently trades at $118.

T-Mobile USA (NYSE:TMUS): The stake was acquired as a result of the reverse-merger and IPO transaction of MetroPCS with T-Mobile USA. MetroPCS was a 2.19% of the U.S. long portfolio established in Q3 2012. This was a timely purchase for Paulson and he is sitting on large gains. The TMUS stake was increased by ~17% to a 3.25% of the U.S. long portfolio position in Q3 2013 at prices between $23 and $26.12. Last quarter saw a marginal stake reduction and this quarter saw an additional ~17% reduction at prices between $29.53 and $33.64. The stock currently trades at $33.09.

Time Warner Cable (NYSE:TWC): TWC is a large 4.01% of the U.S. long portfolio stake established in Q3 2013 at prices between $107 and $118. The position was almost doubled last quarter at prices between $110 and $138. The aggressive stake build-up worked almost immediately as Comcast (NASDAQ:CMCSA) agreed to buy in TWC an all-stock deal (announced 2/14/2014, 2.875 shares of CMCSA for each share of TWC held). This quarter saw a minor stake reduction.

Vodafone Group: VOD was a very small 0.57% position as of Q2 2013. It was substantially increased to a 4.53% position in Q3 2013 at prices between $28.50 and $35.12. Last quarter saw a ~76% stake increase at prices between $34.43 and $39.31. This quarter, the share count reduced as a result of Vodafone's Verizon stake disposal: VOD ADR holders received 6 new shares for 11 old shares held. They also received a $4.9 special dividend and 0.26 shares of Verizon for each share of VOD. VOD is Paulson's third-largest 13F position at 5.14% of the U.S. long portfolio. The stock currently trades at $36.44.

Sprint (NYSE:S): S was Paulson's largest position in Q2 2013 at 9.90% of the U.S. long portfolio. The stake was established in Q4 2012 and doubled in Q1 2013. In Q3 2013, the position was reduced to a 2.27% position at prices between $5.50 and $7.25. Last quarter saw a 13% stake increase at prices between $5.97 and $10.79, and there was minor trimming this quarter. The stock currently trades at $9.

Whiting Petroleum (NYSE:WLL): WLL was a very small 0.31% of the U.S. long portfolio position in Q3 2013. The stake was increased to a large 3.15% position last quarter at prices between $58 and $70. This quarter saw a 9% trimming at prices between $56 and $71. The stock currently trades at $71.21.

Aetna Inc. (NYSE:AET) & Grifols S A (NASDAQ:GRFS): These are medium-sized positions that were marginally decreased in the last two quarters. The positions were built-up aggressively over several quarters. The marginal stake reductions do not indicate a change in bias.

Radian Group (NYSE:RDN), HCA Holdings (NYSE:HCA) and NovaGold (NYSEMKT:NG): These are very small positions (less than 1% of the U.S. long portfolio) that were reduced marginally this quarter. The minor activity does not indicate a change in bias.

Stake Increases:

Caesars Entertainment: CZR is a 1.70% position that was increased by 5.2% last quarter at prices between $16.74 and $22.39. The stake was increased by another 11% this quarter at prices between $19 and $26.47. The stock currently trades at $19. The original holding is from prior to the 02/2012 IPO.

Cobalt International Energy (NYSE:CIE): CIE was a minute 0.12% of the U.S. long portfolio stake as of Q1 2013. The position was increased to a substantial 2.63% stake in Q2 2013 at prices between $25 and $29. Q3 2013 saw a reversal, as ~17% of the position was sold at prices between $24.40 and $30.20. Last quarter, the position was increased by 12.5% at prices between $22.49 and $25. The stake was more than doubled this quarter at prices between $15.85 and $19.46. The stock currently trades at $17.22, and the position stands at 2.44% of the U.S. long portfolio. For investors attempting to follow Paulson, CIE is a good option to consider for further research.

Oasis Petroleum (NYSE:OAS): OAS was a very small 0.25% of the U.S. long portfolio position as of Q3 2013. The stake was increased substantially to a 2.24% position last quarter at prices between $43 and $57. It was increased by an additional one-third this quarter at prices between $39 and $47. The stock currently trades below the low-end of that range at $47.78. For investors attempting to follow Paulson, OAS is a very good option to consider.

American Airlines Group (NASDAQ:AAL): AAL is a 1.06% of the U.S. long portfolio position established last quarter and increased by 43% this quarter. The stake build-up happened at prices between $24.60 and $39 and the stock currently trades at $38.53.

General Motors (NYSE:GM): GM is a very small 0.68% of the U.S. long portfolio position. The original position was more than doubled this quarter. The position size is still very small to indicate a clear bias.

Kept Steady:

Houghton Mifflin Harcourt (NASDAQ:HMHC): HMHC is a 3.08% of the U.S. long portfolio position established last quarter as a result of its November 2013 IPO. The company filed for Chapter 11 bankruptcy protection in March 2012. Paulson held senior debt that got converted into equity. The IPO was priced at $12 per share and it currently trades at $17.66.

Extended Stay America (NYSE:STAY): STAY is Paulson's largest 13F position at 6.21% of the U.S. long portfolio. The stake came about as a result of the firm's IPO in November 2013. Extended Stay America filed Chapter 11 bankruptcy on June 16, 2009, and an investment group consisting of Paulson & Company, Blackstone Group, and Centerbridge Partners bought Extended Stay America out of bankruptcy in October 2010. The IPO has already made the firms more than three times their investment. It is interesting that Paulson has chosen to hold on - so far. STAY currently trades at $22.30 compared to the IPO offering price of $20.

SPDR Gold Trust (NYSEARCA:GLD): GLD was Paulson's largest position by far at 19.03% of the U.S. long portfolio as of Q1 2013. It was reduced by more than half in Q2 2013 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 stock currently trades at $124.50. The position was kept steady in the last three quarters, and it is currently his second-largest 13F position at 6.19% of the U.S. long portfolio.

Realogy Holdings (NYSE:RLGY): RLGY is a 2.55% of the U.S. long portfolio position that was kept steady in the last two quarters. The original investment was made prior to the October 2012 IPO. The stock is currently trading at $36.22 and shows a return of around 8% since IPO.

Shire PLC ADR (NASDAQ:SHPG): SHPG is a 1.84% of the U.S. long portfolio stake established in Q3 2012 at prices between $85 and $94. In Q2 2013, the position was doubled at prices between $87 and $100. Last quarter saw a ~11% stake reduction at prices between $113 and $139. The stock currently trades at $166.

CNO Financial (NYSE:CNO), Popular Inc. (NASDAQ:BPOP), Bank of America (NYSE:BAC) WTS: These 1 to 1.5% positions were left untouched this quarter. The sizes are very small to indicate any bias.

Compuware Corporation (NASDAQ:CPWR), Capital One 2018 Warrants, Genworth Financial (NYSE:GNW), & MGIC Investment (NYSE:MTG): These are very small positions (less than 1% of the U.S. long portfolio) that were left untouched this quarter.

Other very small positions (less than 0.5% of the US long portfolio each) in the portfolio include Actavis PLC (NYSE:ACT), Agnico Eagle Mines (NYSE:AEM), Allied Nevada Gold (NYSEMKT:ANV), Cooper Tire & Rubber (NYSE:CTB), Delphi Automotive (NYSE:DLPH), Dex Media (NASDAQ:DXM), Enzymotec Ltd. (NASDAQ:ENZY), Felcor Lodging (NYSE:FCH), Gold Fields Ltd. (NYSE:GFI), Howard Hughes Corporation (NYSE:HHC), International Tower Hill, Iamgold Corp. (NYSE:IAG), Kamada Ltd. (NASDAQ:KMDA), Novacopper Inc. (NYSEMKT:NCQ), Post Holdings Inc. (NYSE:POST), Randgold Resourced Ltd. (NASDAQ:GOLD), Rock-Tenn Co. (NYSE:RKT), Sibanye Gold (NYSE:SBGL), Strategic Hotels & Resorts (NYSE:BEE), Sunstone Hotel Investments (NYSE:SHO), Vanda Pharma (NASDAQ:VNDA), WhiteWave Foods (NYSE:WWAV), and William Lyon Homes (NYSE:WLH).

The spreadsheet below highlights changes to Paulson's U.S. stock holdings in Q1 2014:

(click to enlarge)

Source: Tracking John Paulson's Paulson & Company Portfolio - Q1 2014 Update