Tracking John Paulson's Paulson & Company Portfolio - Q3 2016 Update

|
Includes: ACAS, AEM, AGN, AIG, AKRX, AU, BAC, BEAV, BIIB, CACQ, CIE, CZR, DVMT, ENDP, GLD, GOLD, GRFS, HPE, MAR, MDT, MNK, MYL, NG, OAS, ODP, RLGY, SGYP, SHPG, SPLS, STAY, TEVA, TMQ, TSU, VMW, VNDA, VRX, WLH
by: John Vincent

Summary

John Paulson's U.S. long portfolio decreased from $9.84B to $9.23B this quarter.

Paulson & Company's largest three positions are Allergan plc, Shire plc, and Mylan NV.

Paulson increased its Biogen Inc. stake while reducing Grifols S.A. during the quarter.

This article is part of a series that provides an ongoing analysis of the changes made to John Paulson's US stock portfolio on a quarterly basis. It is based on Paulson's regulatory 13F Form filed on 11/14/2016. 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 Q2 2016.

This quarter, Paulson's US long portfolio decreased ~6% from $9.84B to $9.23B. There are 94 13F securities in the portfolio, although only 31 of them are significantly large equity holdings (more than 0.5% of the US long portfolio). The article is focused on the larger holdings. The top five positions are Allergan plc, Shire plc, Mylan NV, Teva Pharmaceuticals, and the SPDR Gold ETF. They together account for ~44% of the entire portfolio. The largest holding is Allergan plc at 10.25% 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:

EMC Corporation (EMC): EMC was a ~3% portfolio position established last quarter at prices between $25.50 and $28. On October 12, 2015, Dell announced a deal to acquire EMC for $24.05 per share cash and 0.111 per share in VMware (NYSE:VMW) tracking stock. The transaction closed in September thus eliminating the position.

Starwood Hotels & Resorts (HOT): HOT was ~3% of the US long portfolio position established in Q2 2015 at prices between $80.50 and $87.50 and increased by ~30% the following quarter at prices between $64.50 and $85.50. Q4 2015 saw a ~26% reduction at prices between $66 and $80 and that was followed with a ~52% reduction in Q1 2016 at prices between $59 and $84. There was another ~19% selling last quarter at prices between $70 and $83. In November 2015, Marriott International (NYSE:MAR) announced a merger with HOT in a cash-and-stock deal ($21 cash and 0.8 shares of MAR for each share of HOT held). The transaction closed in September thus eliminating the position.

B/E Aerospace (NASDAQ:BEAV): BEAV is a ~0.5% portfolio stake purchased in Q1 2016 at prices between $38 and $47 and reduced by two-thirds last quarter at prices between $42.50 and $50. The disposal this quarter was at prices between $45 and $52. The stock is now at $59.13.

New Stakes:

Dell Technologies (NYSE:DVMT): DVMT is a very small ~0.50% portfolio stake established this quarter. The VMware tracking stock came about as a result of Dell's deal for EMC Corporation. Paulson had ~10.5M shares of EMC for which he received ~1M shares of DVMT in the ratio 1:0.111 along with $24.05 per share in cash.

Note: DVMT currently trades at ~$52, a wide discount to VMW which is trading at ~$80.

Hewlett Packard Enterprise (NYSE:HPE): HPE is a ~1.5% portfolio position purchased this quarter at prices between $18 and $23 and the stock is now just above that range at $23.31.

Stake Decreases:

Allergan plc (NYSE:AGN): AGN was a minutely small 0.29% of the US long portfolio position in Q2 2014. The following two quarters saw a ~420% increase at prices between $202 and $271. Q2 2015 saw a further ~27% increase at prices between $283 and $313. In Q4 2015, there was an about-turn: ~23% reduction at prices between $253 and $323. Last quarter saw another ~26% selling at prices between $202 and $278. The stock is currently at $192 and the stake is still Paulson's largest at 10.25% of the portfolio. There was marginal trimming this quarter.

AngloGold Ashanti (NYSE:AU): AU is a 2.21% position. It is a long-term stake that has been in the portfolio since 2009. Q4 2015 had seen a ~9% trimming while the following quarter saw a further one-third reduction at prices between $7 and $14. Last quarter saw another ~19% reduction at prices between $13 and $18. The stock currently trades at $11.43. Paulson still controls ~3% of the business. This quarter saw marginal trimming.

Akorn Inc. (NASDAQ:AKRX): The 2.65% AKRX position was first purchased in Q4 2015 at prices between $22 and $37.50 and increased by ~225% the following quarter at prices between $18.50 and $38.50. The stock is now at $21.89. Last two quarters have seen minor trimming.

Cobalt International Energy (NYSE:CIE): CIE was a minute 0.12% of the US 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. The stake was more than doubled in Q1 2014 at prices between $16 and $19.50 and the following quarter saw a further 52% increase at prices between $17 and $19.50. This quarter saw ~20% selling at prices between $0.84 and $1.72. The stock currently trades at $1.22 and the stake stands at 0.42% of the US long portfolio (~8% of the business). Paulson realized losses.

Endo International plc (NASDAQ:ENDP): A very small ENDP stake was increased by almost 200% in Q1 2016 at prices between $28 and $61. Last two quarters have seen a combined ~18% reduction at prices between $17 and $43. The stock is now at $23.25. The stake is at 1.74% of the portfolio.

Extended Stay America (NYSE:STAY): STAY is a fairly large ~6% of the US long portfolio position. The stake came about as a result of the firm's IPO in November 2013. STAY currently trades at $15.38 compared to the IPO offering price of $20. Q4 2015 had seen a ~11% trimming at prices between $16 and $19 and that was followed with another ~12% reduction this quarter at ~$14. Paulson still controls ~19% of the business.

Note: 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. At the time of the 11/2013 IPO, the firms already made more than three times their investment.

Grifols S.A. (NASDAQ:GRFS): GRFS is a minutely small 0.43% of the US long portfolio position. There was a ~30% reduction in Q4 2015 at prices between $15 and $18 while the following quarter saw a ~40% increase at prices between $14 and $16. Last two quarters have seen a combined ~80% selling at ~$16. The stock is now at $15.36. The original stake is from 2011 and Paulson's cost-basis on that was very low.

Mallinckrodt PLC (NYSE:MNK): MNK is a ~6% of the US long portfolio position established in Q3 2013 at prices between $42 and $47. Q2 & Q3 2014 saw a combined 55% increase at prices between $60 and $90. There was some selling in H1 2015: ~28% reduction at prices between $94 and $130. Q4 2015 saw the pattern reverse: ~31% increase at prices between $53 and $77. The stock currently trades at $54.59. The current stake is at ~7.4% of the business. Last two quarters have seen a combined ~11% reduction at prices between $54 and $83.

Note: MNK, a July 2013 spinoff from Covidien plc, started trading at around $42. Covidien plc in turn was acquired by Medtronic (NYSE:MDT) in January 2015.

Mylan Inc. (NASDAQ:MYL): MYL is a large (top three) 9.40% of the US long portfolio position. The original stake was purchased in Q1 2010 at prices between $17 and $23. Q1 2013 saw a 25% reduction at prices between $27.50 and $31, and the following quarter saw another one-third reduction at prices between $29 and $32. Q4 2014 saw an about-turn: ~20% increase at prices between $45 and $59 and that was followed with a ~47% increase in Q2 2015 at prices between $58 and $76. The stock trades currently at $36.47. Last two quarters saw marginal trimming.

NovaGold (NYSEMKT:NG): NG is a small 1.55% of the portfolio long-term stake established in 2010. This quarter saw a ~28% reduction at prices between $5 and $6.50. The stock is currently at $4.44. Paulson has a high cost-basis on NG and controls ~8% of the business. There was a marginal reduction this quarter.

Office Depot (NYSE:ODP): ODP is a very small ~0.5% stake. It was doubled last quarter at prices between $3 and $8 and it is now at $4.68. There was a marginal ~2% selling this quarter.

Note: Office Depot's stock price dropped sharply in May after the merger deal with Staples (NASDAQ:SPLS) was scuttled by a federal judge.

Shire PLC ADR (NASDAQ:SHPG): SHPG is a top-three stake at 9.93% of the US long portfolio. It was established in Q3 2012 at prices between $85 and $94. In Q2 2013, the position was doubled at prices between $87 and $100. In Q2 2014, the stake was again increased by ~36% at prices between $142 and $236. The following quarter saw a whopping ~170% increase at prices between $232 and $263. In Q2 2015, the pattern reversed: ~15% reduction at prices between $227 and $260. Last quarter saw a ~26% reduction at prices between $165 and $192 and that was followed with a ~11% selling this quarter at prices between $184 and $207. The stock currently trades at $178.

Synergy Pharmaceuticals (NASDAQ:SGYP): The ~1.50% SGYP position saw a ~150% increase last quarter at prices between $2.50 and $4. There was a ~13% reduction this quarter at ~$5.60 and the stock currently trades at $5.59. SGYP has doubled since the lows reached in March partly due to acquisition rumors.

Note: Regulatory filings since the quarter ended show a marginal 140K share reduction at $4.42. Paulson still controls ~13% of the business.

Teva Pharmaceuticals (NYSE:TEVA): TEVA was a very small 0.55% of the US long portfolio stake established in Q2 2015 at prices between $59 and $67. It was increased to a fairly large 5.28% position the following quarter at prices between $55 and $72. Q4 2015 saw a further ~13% increase at prices between $56 and $66. The stock currently trades at $38.56 and it is now a large stake at ~8%. Last quarter saw a ~19% reduction at prices between $48.50 and $57. That was followed with a very minor ~4% trimming this quarter.

Valeant Pharmaceuticals (NYSE:VRX): VRX position was increased by almost 300% in Q1 2015 at prices between $143 and $205 and another ~340% the following quarter at prices between $197 and $242. Q4 2015 also saw another ~50% increase at prices between $70 and $182. The aggressive buying against falling prices continued last quarter: ~44% increase at prices between $19 and $36. The stock currently trades at $17.95 and the stake is at ~5% of the portfolio. There was marginal trimming this quarter.

Bank of America (NYSE:BAC) warrants, Caesars Acquisition (NASDAQ:CACQ), and Caesars Entertainment (NASDAQ:CZR), Oasis Petroleum (NYSE:OAS), TIM Participacoes (NYSE:TSU), and VMware Inc.: These are very small (less than ~1.5% of the portfolio each) stakes reduced marginally this quarter. Although the relative position sizes are small, it is very significant that Paulson has significant ~10% ownership stakes each in CACQ and CZR.

Stake Increases:

American Capital Ltd. (NASDAQ:ACAS) and Biogen Inc. (NASDAQ:BIIB): These are very small (less than ~1% of the portfolio each) stakes that saw increases this quarter. ACAS was increased marginally while BIIB saw a huge 150% increase at prices between $242 and $330. BIIB currently trades at $317.

Kept Steady:

American International Group (NYSE:AIG): AIG is a fairly large ~6% of the US long portfolio stake established in Q1 2015 at prices between $49 and $56. Q4 2015 saw a ~21% reduction at prices between $57 and $64. Last quarter saw another ~19% reduction at prices between $49 and $58. The stock currently trades at $63.91.

Note: Carl Icahn has a ~4% activist stake in the business.

Realogy Holdings (NYSE:RLGY): RLGY is a 1.34% of the US long portfolio (~3.3% of the business) position that was reduced by two-thirds over the six quarters through Q2 2016 at prices between $28 and $49. The original investment was made prior to the October 2012 IPO. The stock currently trades at $24.44.

SPDR Gold Trust ETF (NYSEARCA:GLD): GLD was Paulson's largest position by far at ~19% of the US long portfolio as of Q1 2013. The original stake was established in Q1 2009 at prices between $83 and $98 and was reduced by ~45% in 2011 at much higher prices. It was reduced by more than half in Q2 2013 as well at prices between $116 and $155. Q4 2015 saw a ~38% reduction at prices between $100 and $114 and that was followed with a ~17% selling the following quarter at prices between $102 and $122. The stock currently trades at $115. The remaining stake is still a top five stake at 6.50% of the portfolio.

Agnico Eagle Mines (NYSE:AEM), Randgold Resources (NASDAQ:GOLD), and William Lyon Homes (NYSE:WLH): These are very small (less than ~1% of the portfolio each) stakes kept steady this quarter. Although the relative position sizes are small, it is very significant that Paulson has significant ~10% ownership stakes each in CACQ and CZR.

Although the relative position sizes are minute, the following 13F stakes are significant as Paulson has sizable ownership: Trilogy Metals (NYSEMKT:TMQ) previously NovaCopper and Vanda Pharmaceuticals (NASDAQ:VNDA).

The spreadsheet below highlights changes to Paulson's US stock holdings in Q3 2016:

Disclosure: I am/we are long AIG, BAC, NG.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

About this article:

Expand
Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Tagged: , , Alternative Investing
Problem with this article? Please tell us. Disagree with this article? .