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John Paulson is the founder and president of Paulson & Co., a New York-based hedge fund with $30 billion in assets under management. He is famous for his bet against sub-prime mortgages in the last downturn. The billionaire businessman earned $3.7 billion dollars in 2008 by shorting the mortgage back securities. More recently in 2010 he made $4.9 billion from his portfolio. His fund is not doing too well in 2011, but it is still worth looking his latest stock picks given his success in directional bets in the recent past.

The following is a list of top new buys of John Paulson’s Paulson & Co.

Stock

Symbol

Shares Held 03/31/2011

Shares Held 06/30/2011

Change In Shares

Life Technologies Corporation

LIFE

0

7,520,000

7,520,000

News Corp.

NWSA

0

10,400,000

10,400,000

Southern Union Co.

SUG

0

4,530,000

4,530,000

Mosaic Co.

MOS

0

2,250,000

2,250,000

Tenet Healthcare Corp.

THC

0

20,000,000

20,000,000

Walter Energy, Inc.

WLT

0

1,000,000

1,000,000

RLJ Lodging Trust

RLJ

0

2,750,000

2,750,000

Source: 13F filing

My favorite long candidates among above stocks are Mosaic Co. and Tenet Healthcare. I also like Life Technologies from a long term perspective due to its low valuations.

The Mosaic Company is a producer and marketer of concentrated phosphate and potash crop nutrients for the global agriculture industry. It is a supplier of phosphate and potash-based crop nutrients and animal feed ingredients. I would recommend buying Mosaic despite of the broader macro concerns.

During the last downturn in 2008, excess inventory in the supply chain coupled with anticipation of decline in fertilizer prices by farmers caused fertilizer producers and retailers to take a hit. However, the current situation is different. Due to the hit fertilizer retailers had taken in 2008, they were cautious this time and have not overstocked fertilizer inventories. Thus, supply chain remains very tight.

Further, grain prices corrected very sharply along with other commodities during the last downturn. Thus, farmers anticipated that fertilizer prices will come down as well. I don't see a similar commodity correction this time given the excess amount of money supply that has entered the system thanks to bailouts, quantitative easing and stimulus. In particular, when we talk of food grains where demand is inelastic, the trend is likely headed up in the mid-long term even if we consider a prolonged recession scenario.

Fertilizer prices are usually correlated with food prices and I believe fertilizer companies like Mosaic are the best bet in the long term to hedge one's portfolio against inflation in these recessionary times.

Tenet Healthcare Corporation operates in one line of business: The provision of health care services through the operation of acute care hospitals and related health care facilities. Its business includes inpatient care, intensive care, cardiac care, radiology services and emergency medical treatment. Tenet's EPS forecast for the current year is $0.44 and next year is $0.50. According to consensus estimates, its top line is expected to grow 5.30% in the current year and 4.00% next year.

Tenet Healthcare is seeing incremental signs of improvement in its business. Tenet reported inline results for the last quarter. However, the interesting thing was trends improved throughout the quarter. Volume was weakest in April and improved in May and June. July volumes were better than June volumes, according to management commentary.

Historically, Q3 is a weaker quarter than Q2. However, for the current year Q3 volumes are expected to be better than Q2 volumes. Trading at ~10x forward EPS, I believe Tenet is a good value buy with improving earnings trends likely to serve as catalyst going forward.

Life Technologies Corporation is a global life sciences company. Life Technologies delivers a range of products and services, including systems, instruments, reagents, software, and custom services. Its portfolio of products include technologies for Polymerase Chain Reaction, sample preparation, cell culture, ribonucleic acid interference analysis, functional genomics research, proteomics and cell biology applications, capillary electrophoresis based sequencing, next generation sequencing, as well as clinical diagnostic applications, forensics, animal, food, pharmaceutical and water testing analysis.

Life Technologies' EPS forecast for the current year is $3.72 and next year is $4.17. According to consensus estimates, its top line is expected to grow 4.40% in the current year and 4.80% next year. The biggest concern investors have for the company is the potential impact of deteriorating academic funding environment.

However, with the company’s valuation near its 10 years low (~10x 2012 EPS), I believe most of the negatives are already priced in at these levels.

News Corporation is a diversified global media company. The Company operates in six segments: Cable network programming, filmed entertainment, television, direct broadcast satellite television, and publishing. News Corporation's EPS forecast for the current year is $1.37 and next year is $1.69. According to consensus estimates, its top line is expected to grow 2.50% in the current year and 4.70% next year.

Southern Union Company is engaged in the gathering, processing, transportation, storage and distribution of natural gas in the United States. The Company owns and operates assets in the regulated and unregulated natural gas industry. Southern Union operates in three segments: Transportation and storage, gathering and processing, and distribution. Southern Union's EPS forecast for the current year is $1.90 and next year is $2.08. According to consensus estimates, its top line is expected to grow 2.90% in the current year and decline 0.90% next year.

Walter Energy, Inc. is a producer and exporter of metallurgical coal for the global steel industry and also produces steam coal, coal bed methane gas (natural gas), metallurgical coke and other related products. The company operates in three business segments: Underground mining, surface mining and walter coke. Walter Energy's EPS forecast for the current year is $10.48 and next year is $12.56. According to consensus estimates, its top line is expected to grow 88.50% in the current year and 21.60% next year.

RLJ Lodging Trust, together with its consolidated subsidiaries, including RLJ Lodging Trust, L.P., is a self-advised and self-administered real estate investment trust, which invests in premium-branded, focused-service and compact full-service hotels. RLJ Lodging's EPS forecast for the current year is $0.25 and next year is $0.61. According to consensus estimates, its top line is expected to grow 6.50% next year.

Source: Top 7 New Buys By John Paulson