Seeking Alpha
Newsletter provider, fund holdings, insider ownership
Profile| Send Message|
( followers)  

Academic research has shown that corporate insiders and hedge funds have an edge over ordinary investors. Hedge funds usually devote significant resources to research stocks and sometimes have access to material non-public information. Insiders, on the other hand, also have material non-public information about their companies. They also have more exposure to their companies’ performance. They will not increase their exposure unless they have reasons to believe that their purchases have a high probability of being profitable.

In this article, we are going to focus on the stocks that corporate insiders and hedge fund manager John Paulson are bullish about. Paulson is one of the most followed money managers today. But the founder of Paulson & Co was relatively unknown before 2007. His bet against subprime mortgages in that year made him rich and famous. He made $3.5 billion from that bet and he made another $5 billion by betting on gold in 2010. Paulson did not perform well this year. His Advantage Plus fund lost about 52% through mid-December. However, the fund still generated an average return of 19% per year since inception.

Below is a list of stocks that are in the 13F portfolio of Paulson & Co as of September 30 and were purchased by at least one insider during the past month.

Company Name

Ticker

Value

Activity

Insiders

TRANSOCEAN LTD

RIG

772911

-14%

2

HEWLETT PACKARD

HPQ

340641

-35%

1

C N O FINANCIAL GROUP INC

CNO

374540

New

1

BLACKROCK INC

BLK

146367

-47%

1

HOWARD HUGHES

HHC

77885

0%

1

QUAD GRAPHICS

QUAD

19461

0%

2

The biggest position on the list above in Paulson’s portfolio is Transocean Ltd (NYSE:RIG). At the end of September, Paulson & Co reported to own $773 million worth of RIG stocks. Additionally, there are two insiders purchased RIG during the past month. Magdy Ihab Toma, EVP of Operations at Transocean, purchased 1000 shares at $44.9969 on December 5. Toma bought another 1000 shares at $50.4783 in late August as well. Another insider who purchased RIG is Steven Newman, who bought 6500 shares at $44.52 on December 5. RIG is currently trading at $38.38, lower than the prices both insiders purchased at. It is likely that RIG is trading at a discount as it has a relatively low forward P/E ratio of 11.78. Steven Cohen’s SAC Capital Advisors also invested $84 million in RIG at the end of the third quarter.

Paulson also had $341 million invested in Hewlett Packard Co (NYSE:HPQ), which was bought by one insider during the past month. On December 2, John Hammergren bought 1000 shares at $28.2075. Now HPQ is trading at $25.55 per share. It seems that HPQ may also be trading at a discount as the $50 billion market cap stock has a low P/E ratio of 7.71. Other PC related stocks such as Microsoft (NASDAQ:MSFT) and Dell (NASDAQ:DELL) also have very low PE ratios despite double digit expected EPS growth rates over the next 5 years. During the third quarter, Seth Klarman’s Baupost Group initiated a brand new $466 million of HPQ stocks. Klarman is also bullish about Microsoft (MSFT).

Other stocks that Paulson and insiders are both bullish about include CNO Financial Group Inc (NYSE:CNO), BlackRock Inc (NYSE:BLK), Howard Hughes Corp (NYSE:HHC), and Quad Graphics Inc (NYSE:QUAD). CNO and BLK are currently trading at prices higher than the prices that insiders purchased at, while HHC and QUAD’s prices are lower than the prices insiders bought at. It seems that most of the stocks that both Paulson and insiders love are trading at discounts as their forward P/E ratios are relatively low. We encourage investors to do some deep research on these stocks for their own portfolios.



Disclosure: I am long MSFT.

Source: 6 Stocks John Paulson And Insiders Love