Tracking John Paulson's Paulson & Company Portfolio - Q3 2018 Update

|
Includes: AABA, AEM, AET, AGN, AKRX, AU, AVGO, BHC, BKD, CA, CMCSA, COL, CTL, CZR, DISCA, DISH, DNB, DVMT, EGN, ENDP, FOX, GLD, GOLD, HZNP, INSW, MDT, MITL, MNK, MYL, NG, NLSN, NMRK, NXPI, ODP, OSG, P, QCOM, SES, SHPG, T, THM, TMQ, TMUS, TSU, UTX, VIAB, VST, XL
by: John Vincent
Summary

John Paulson’s 13F portfolio value increased from $4.90B to $5.34B this quarter.

Paulson & Company's largest three positions are Bausch Health, Shire plc, and SPDR Gold ETF.

Paulson increased Discovery Inc. and NXP Semiconductors while reducing T-Mobile US and Mallinckrodt plc.

This article is part of a series that provides an ongoing analysis of the changes made to John Paulson’s 13F stock portfolio on a quarterly basis. It is based on Paulson’s regulatory 13F Form filed on 11/14/2018. Please visit our Tracking John Paulson’s Paulson & Company Portfolio series to get an idea of his investment philosophy and our previous update for the fund’s moves during Q2 2018.

This quarter, Paulson’s 13F portfolio value increased ~9% from $4.90B to $5.34B. There are 58 13F securities in the portfolio, although only 36 of them are significantly large equity holdings (more than 0.5% of the 13F portfolio). The article is focused on the larger holdings. The top five positions are Bausch Health, Shire plc, SPDR Gold ETF, Mylan NV, and Discover Communications, and they add up to ~44% of the portfolio. The largest holding is Bausch Health at ~10% 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, check out the book “The Greatest Trade Ever”.

Stake Disposals:

Comcast (CMCSA) & Calls: CMCSA was a very small 0.70% portfolio stake established last quarter at prices between $30.50 and $34.50 and disposed this quarter at prices between $33 and $38. The stock currently trades at $38.18.

XL Group (XL): XL was a ~1% merger-arbitrage stake. AXA Group agreed to acquire XL Group for $57.30 per share cash in a transaction announced in March. It closed in September thus eliminating the position.

Vistra Energy (VST) previously TCEH: VST was a 1.79% of the portfolio position established in Q2 2017 at prices between $15 and $20. Vistra exited bankruptcy and started trading in October 2016 at ~$16 per share. There was a ~13% trimming in Q4 2017 and that was followed with a two-thirds reduction in Q1 2018 at prices between $17.50 and $21. The disposal this quarter was at prices between $22 and $25. The stock is now at $23.55.

Energen Corp. (EGN): EGN was a ~1% portfolio stake established in Q1 2018 at prices between $49 and $63 and disposed this quarter at prices between $71 and $87. The stock currently trades well above that range at $73.28.

CenturyLink Inc. (CTL): The very small 0.75% CTL position was established in Q4 2017 at prices between $13.75 and $20.25 and exited this quarter at prices between $18.25 and $24. It now goes for $19.03.

New Stakes:

CA Inc. (CA), Dell Technologies (DVMT), Nielsen Holdings (NLSN), Dun & Bradstreet (DNB), and Pandora (P): These are the five new positions this quarter. The fairly large 4.5% CA position was established at ~$44. It was a merger arbitrage stake. Broadcom (AVGO) acquired CA Inc. for $44.50 per share cash and that transaction closed earlier this month. The 3.55% DVMT stake was purchased at prices between $92 and $99 and it is now at $103. Dell has proposed to purchase the tracking stock for $120 per share cash subject to a $14B cap. NLSN is a 1.81% position established at prices between $21.75 and $32 and it currently goes for $25.60. The ~1% DNB position was purchased at prices between $124 and $145 and it is now at $143. In August, DNB agreed to be acquired by an investor group led by CC Capital for $145 per share cash. P is a very small 0.72% portfolio position established at prices between $6.75 and $10 and the stock is now at $8.58.

Stake Decreases:

Mylan Inc. (MYL): MYL is a top five position at 7.88% of the portfolio. The original stake was purchased in Q1 2010 at prices between $17 and $23. Last significant buying was in Q2 2015: ~50% increase at prices between $58 and $76. Last two years have seen a ~50% selling at prices between $30.50 and $45. The stock currently trades at $34.60.

Allergan plc (AGN): AGN was a minutely small 0.29% of the 13F 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: a combined ~75% selling over the next two years at prices between $192 and $320. There was another ~15% reduction this quarter at prices between $167 and $193. The stock is now at ~$156 and the stake is at 5.78% of the portfolio.

T-Mobile US (TMUS): The ~3% portfolio stake in TMUS was purchased in Q1 2017 at prices between $56.60 and $65 and increased by ~46% the following quarter at prices between $60 and $68. Last three quarters through Q1 2018 had seen a combined ~37% selling at prices between $55 and $65.50 and that was followed with a similar reduction this quarter at prices between $58 and $70.50. The stock is now at $68.

Endo International plc (ENDP): A very small ENDP stake was increased by almost 200% in Q1 2016 at prices between $28 and $61. The next two quarters saw a combined ~18% reduction at prices between $17 and $43. The stock is now at $12.46 and the stake is at 2.72% of the portfolio. There was a ~28% increase in Q1 2018 at prices between $5.50 and $9. This quarter saw a ~6% trimming.

Horizon Pharma (HZNP): The 2.63% HZNP position was purchased in Q2 2017 at prices between $9.65 and $15.75 and increased by ~40% in Q4 2017 at prices between $13 and $15. The stock is now at $22.22. There was a ~3% trimming in Q1 2018 and that was followed with a ~7% selling this quarter.

Altaba Inc. (AABA) previously Yahoo: The 2.20% AABA stake was established in Q2 2017 at prices between $46 and $56 and increased by ~42% the following quarter at prices between $54.50 and $67.50. Q4 2017 saw an about turn: ~55% reduction at prices between $65 and $73. It is now at $62.22. There was a ~10% stake increase in the last two quarters while this quarter saw a ~6% trimming.

AT&T Inc. (T): The small 1.44% portfolio stake in T came about as a result of the Time Warner acquisition that closed in June. They had a small position in Time Warner for which they received these shares when the transaction closed. The stock is currently at $30.35.

International Seaways (INSW): The INSW position came about as a result of its spinoff from Overseas Shipholding Group (OSG) that started regular-way trading in December 2016 at ~$15 per share. It is now at $16.68. There was ~6% trimming in Q2 2017 and that was followed with a ~11% trimming this quarter.

Note: Paulson controls ~10% of International Seaways.

Mallinckrodt PLC (MNK): MNK is now a very small ~1% of the 13F portfolio position. It was established in Q3 2013 at prices between $42 and $47. Q2 and Q3 2014 saw a combined 55% increase at prices between $60 and $90. There was 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 seven quarters through Q4 2017 had seen a combined ~60% reduction at prices between $21 and $81 and that was followed with a ~45% selling this quarter at prices between $19 and $36. The stock currently trades at $30.82.

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

Rockwell Collins (COL): The COL position was increased by ~135% in Q4 2017 at prices between $130 and $137 and that was followed with a ~63% increase next quarter at prices between $133 and $139. It currently trades at ~$130. There was a ~9% trimming last quarter and a similar reduction this quarter.

Note: Rockwell Collins is a merger-arbitrage stake. It is getting acquired by United Technologies (UTX) for $140 per share in a cash-and-stock deal ($93.33 cash).

Mitel Networks (MITL) and Akron Inc. (AKRX): These two positions purchased last quarter saw reductions this quarter. MITL is a merger-arbitrage stake. It is getting acquired by affiliates of Searchlight Capital Partners for $11.15 per share cash. There was a ~25% selling this quarter at prices between $10.94 and $11.05. The stock is now at ~$11. Akron had an agreement to be acquired by Fresenius for $34 per share, but Fresenius abandoned the offer in April after it found material breaches to FDA data integrity requirements. Akorn in turn has filed a complaint against Fresenius asking to fulfill its merger obligation. The position was reduced by ~70% this quarter at prices between $12.85 and $19.50. The stock is currently at $6.78.

Stake Increases:

Shire PLC ADR (SHPG): SHPG is the second-largest position at 9.68% of the 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. The stake was since increased, but in Q2 2015, the pattern reversed: Last three years saw a combined ~57% selling at prices between $127 and $227. The stock currently trades at ~$176. There was a marginal increase this quarter.

Note: Shire PLC is getting acquired by Takeda in a deal valued at ~$195 per share.

Discovery Inc. (DISCA): DISCA position saw a 320% stake increase in Q1 2018 at prices between $21.50 and $26.50 while last quarter there was a ~140% further increase at prices between $21 and $24. DISCA currently trades at $30.47 and the stake is now fairly large at 6.77% of the portfolio. There was a ~22% stake increase this quarter at prices between $25.50 and $32.25.

NXP Semiconductors (NXPI): NXPI stake saw a ~200% increase in Q1 2017 to a 1.56% portfolio position at prices between $96 and $104. The position was almost sold out in Q3 2017 at prices between $109 and $113. Q4 2017 saw another about turn: huge increase to a 3.31% portfolio stake at prices between $113 and $118. There was a ~16% selling in Q1 2018 at prices between $115 and $126. The pattern reversed again last quarter: almost two-thirds increase at prices between $92 and $120 and that was followed with a ~28% increase this quarter at prices between $85 and $110. The stock currently trades at $81.36.

Note: NXPI was a merger-arbitrage stake. Qualcomm (QCOM) was to acquire them at $127.50 per share cash but that transaction fell through in July.

Aetna Inc. (AET): The merger-arbitrage stake in AET saw a ~70% increase last quarter at prices between $168 and $190 and another ~28% increase this quarter at prices between $185 and $206. The stock is now at ~$208. Last December, CVS agreed to acquire Aetna in a cash-and-stock deal ($145 per share in cash and 0.8378 CVS shares for each share held).

Twenty-First Century Fox (FOX): The FOX position was almost sold out in Q1 2018 at prices between $34 and $38.50. It was purchased in Q4 2017 at prices between $24.50 and $34.75. Last quarter saw the position built back up to a ~1.5% portfolio position at prices between $35.70 and $50. The stock is now at $48.54. There was a marginal increase this quarter.

Randgold Resources (GOLD): The very small 0.56% portfolio stake in GOLD saw a ~27% increase this quarter at prices between $61 and $77 and it is now at $81.90.

Kept Steady:

Bausch Health Companies (BHC) previously Valeant Pharmaceuticals: BHC 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 in Q2 2016: ~44% increase at prices between $19 and $36. The stock currently trades near the low end of those ranges at $23.50 and the stake has become the largest position in the portfolio at ~10%.

Note: Paulson controls ~6% of Bausch Health.

SPDR Gold Trust ETF (GLD): GLD was Paulson’s largest position by far at ~19% of the 13F 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 and the following quarter saw a combined ~60% reduction at prices between $100 and $122. The stock currently trades at ~$116. The remaining stake is still the third-largest at ~9% of the portfolio.

DISH Network (DISH): DISH is a 3.33% portfolio position established in Q1 2017 at prices between $58 and $64. Q2 & Q3 2017 saw a combined ~36% stake increase at prices between $52 and $66. The stock is currently below the low end of those ranges at $31.50. There was an ~11% trimming in Q4 2017 while next quarter there was a ~19% stake increase. For investors attempting to follow Paulson, DISH is a good option to consider for further research.

AngloGold Ashanti (AU): AU is a ~2% 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 one-third reduction at prices between $7 and $14. Q2 2016 saw another ~20% reduction at prices between $13 and $18. The stock is currently at $9.87.

Note: Paulson controls ~3% of AngloGold Ashanti.

Viacom (VIAB): The 1.63% VIAB position saw a ~160% stake increase in Q1 2018 at prices between $29 and $34 and it is currently near the low end of that range at $31.42.

NovaGold (NG): NG is a 1.53% of the portfolio long-term stake established in 2010. Q2 2016 saw a ~28% reduction at prices between $5 and $6.50 and that was followed with a ~13% selling in Q4 2016. The stock is currently at $3.84.

Note: Paulson has a high cost-basis on NG and controls ~7% of the business.

TIM Participacoes (TSU): TSU is a 1.36% portfolio stake first purchased in Q2 2014 at prices between $24 and $30. The position had remained relatively steady since. Q1 2018 saw a ~10% selling at prices between $19.50 and $22.50. The stock is currently trading below those ranges at $15.41.

Agnico Eagle Mines (AEM), Brookdale Senior Living (BKD), Caesars Entertainment (CZR), International Tower Hill Mines (THM), Newmark Group (NMRK), and Office Depot (ODP): These are small (less than ~1% of the portfolio each) stakes kept steady this quarter.

Note: Paulson has a ~32% ownership stake in International Tower Hill Mines.

Although the relative position sizes are minute, the following 13F stakes are significant as Paulson has sizable ownership: Synthesis Energy Systems (SES) and Trilogy Metals (TMQ).

The spreadsheet below highlights changes to Paulson’s US stock holdings in Q3 2018:

John Paulson - Paulson and Company - Q3 2018 13F Report

Disclosure: I am/we are long BHC, MYL, NG, NLSN, NXPI. 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 microcap stocks. Please be aware of the risks associated with these stocks.