John Paulson Is Decreasing His Position In These 7 Stocks

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 |  Includes: ANRZQ, APC, BAC, CMCSA, MDT, MYL, RIG
by: The Analyst Hub

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 subprime mortgages in the last downturn. The billionaire businessman earned $3.7 billion dollars in 2008 by shorting 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 at his latest stock picks given his success in directional bets in the recent past.

I discussed top new buys of John Paulson in a previous article. In addition to new buys, it is also interesting to look at top companies where Paulson & Co. is booking profit and selling its holdings. The following is a list of top stocks where Paulson & Co. is decreasing its holdings:

Stock

Symbol

Shares Held 03/31/2011

Shares Held 06/30/2011

Change In Shares

Bank of America Corporation

BAC

123,634,429

60,444,779

-63,189,650

Comcast Corporation

CMCSA

40,000,000

20,300,000

-19,700,000

Alpha Natural Resources, Inc.

ANR

12,000,000

3,398,234

-8,601,766

Transocean Ltd.

RIG

24,467,500

18,810,000

-5,657,500

Anadarko Petroleum Corporation

APC

21,233,885

16,712,188

-4,521,697

Mylan, Inc.

MYL

26,900,000

14,940,000

-11,960,000

Medtronic, Inc.

MDT

9,300,000

4,875,000

-4,425,000

Click to enlarge

Source: 13F filing.

John Paulson avoided significant losses after timely reducing its exposure in Bank of America. The stock is still down 25% since July 1, 2011 despite of a recent rally after Warren Buffett’s investments.

Bank of America is a financial institution, serving individual consumers, small and middle market businesses, corporations and governments with a range of banking, investing, asset management and other financial and risk management products and services. Bank of America's EPS forecast for the current year is -$0.30 and next year is $1.45. According to consensus estimates, its top line is expected to decline 18.40% in the current year and grow 17.30% next year.

I still remain skeptical about banks with weaker balance sheets like Bank of America. Given my conservative nature, I would recommend going for well capitalized names like Wells Fargo (WFC) where the risk-rewards are more balanced.

One stock, where I don’t agree with Paulson & Co. and would like to go long on is Anadarko Petroleum Corporation. Anadarko Petroleum Corporation is an independent oil and natural gas exploration and production company. Anadarko’s portfolio of assets includes positions in onshore resource plays in the Rocky Mountains region, the Southern United States and the Appalachian basin.

Anadarko operates in three operating segments: oil and gas exploration and production, midstream, and marketing. Anadarko's EPS forecast for the current year is $3.50 and next year is $4.34. According to consensus estimates, its top line is expected to grow 25.50% in the current year and 13.90% next year.

The recent slide in Anadarko’s share price has provided a pretty compelling entry point in its stock. Anadarko is currently trading at just 65% P/NAV. Even after adjusting for possible Macondo liability, Anadarko is trading at 70% P/NAV, which is still very compelling given Anadarko’s strong portfolio, which includes offshore assets in West Africa and East African gas assets. Further, a ramp-up in activity in the Gulf of Mexico is another positive for Anadarko.

One of the other things that make me confident in recommending Anadarko is that I don’t see oil going back to 2008 lows. I think commodities will hold up much better as compared to 2008 recession if there is any downturn now. This is mainly due to amount of quantitative easing done by the Fed, which is likely to fuel inflation. Since oil companies usually trade in line with crude oil prices, Anadarko will outperform even if there is another recession.

For other stocks in the above list, here are some of the specifics about these companies, including a brief description of their businesses, growth expectations (top line and bottom line):

Comcast Corporation is a provider of video, high-speed internet and phone services (cable services) to residential and business customers in the United States. As of December 31, 2010, the company’s cable systems served approximately 22.8 million video customers, 17 million high-speed Internet customers and 8.6 million phone customers, and passed over 51 million homes and businesses in 39 states and the District of Columbia. Comcast operates in two segments: Cable and programming. Comcast's EPS forecast for the current year is $1.60 and next year is $1.91. According to consensus estimates, its top line is expected to grow 48.40% in the current year and 7.50% next year.

Alpha Natural Resources, Inc. is a coal supplier in the United States. The company is a supplier and exporter of metallurgical coal for use in the steel-making process, and a supplier of thermal coal to electric utilities and manufacturing industries. It operates 66 mines and 13 coal preparation plants in Northern and Central Appalachia and the Powder River Basin. Alpha Natural's EPS forecast for the current year is $3.05 and next year is $3.92. According to consensus estimates, its top line is expected to grow 85.30% in the current year and 27.70% next year.

Transocean Ltd. is an international provider of offshore contract drilling services for oil and gas wells. The company operates in two segments: Contract drilling services and other operations. Contract drilling services, the company’s primary business, includes contracting Transocean’s mobile offshore drilling fleet, related equipment and work crews primarily on a day rate basis to drill oil and gas wells. Its other operations segment includes drilling management services, and oil and gas properties. Transocean's EPS forecast for the current year is $3.56 and next year is $5.91. According to consensus estimates, its top line is expected to decline 1.60% in the current year and grow 11.80% next year.

Mylan Inc. is a generic and specialty pharmaceutical company, which provides products to customers in more than 150 countries and territories. The company operates in two segments: Generics and specialty. Mylan's EPS forecast for the current year is $2.01 and next year is $2.32. According to consensus estimates, its top line is expected to grow 13.20% in the current year and 10.10% next year.

Medtronic, Inc. is a medical technology company. The company is engaged in research, design, manufacture and sale of products to alleviate pain, restore health and extend life. It manufactures and sells device-based medical therapies. It operates in two segments: Cardiac and vascular group, and restorative therapies group. Its primary customers include hospitals, clinics, third party healthcare providers, distributors and other institutions, including governmental healthcare programs and group purchasing organizations. Medtronic's EPS forecast for the current year is $3.45 and next year is $3.77. According to consensus estimates, its top line is expected to grow 4.40% in the current year and 3.90% next year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.