Tracking John Paulson's Paulson & Company Portfolio - Q4 2018 Update

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Includes: AABA, AEM, AET, AGN, AU, AVGO, BHC, BKD, BSIG, CA, COL, CZR, DISCA, DISH, DNB, ENDP, FNF, FOX, GLD, GOLD, HZNP, IMPV, INSW, MDT, MITL, MNK, MYL, NG, NLSN, NMRK, NXPI, NXST, ODP, OSG, P, QCOM, RHT, SES, SHPG, SIRI, STC, T, THM, TMQ, TMUS, TRCO, TSU, TVPT, UTX, VIAB
by: John Vincent
Summary

John Paulson’s 13F portfolio value decreased from $5.34B to $4.17B this quarter.

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

Paulson increased Twenty-First Century Fox, Pandora Media, and BrightSphere Investment Group while reducing Viacom, Nielsen, and Mallinckrodt.

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 02/14/2019. 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 Q3 2018.

This quarter, Paulson’s 13F portfolio value decreased ~22% from $5.34B to $4.17B. There are 51 13F securities in the portfolio, although only 34 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 Shire plc, SPDR Gold Trust ETF, Bausch Health, Mylan NV, and Discover Inc., and they add up to ~48% 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:

CA Inc. (CA), Dell Technologies (DVMT), and Dun & Bradstreet (DNB): These were merger arbitrage stakes established last quarter. The fairly large 4.5% CA position was established at ~$44. Broadcom (AVGO) acquired CA for $44.50 per share cash and that transaction closed in October. The 3.55% DVMT stake was purchased at prices between $92 and $99. Dell proposed to purchase the tracking stock for $120 per share cash subject to a $14B cap and that transaction closed in December. In August, an investor group led by CC Capital agreed to acquire DNB for $145 per share cash and that transaction closed earlier this month.

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 stake was disposed this quarter. The stock is currently at $31.15.

Mitel Networks (MITL): MITL is a merger-arbitrage stake purchased in Q2 2018. It got acquired by affiliates of Searchlight Capital Partners for $11.15 per share cash and the transaction closed in November, thus eliminating this position. There was a ~25% selling last quarter at prices between $10.94 and $11.05.

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 was a merger-arbitrage stake. It got acquired by United Technologies (UTX) for $140 per share in a cash-and-stock deal ($93.33 cash) that closed in November.

Aetna Inc. (AET): The merger-arbitrage stake in AET saw a ~70% increase in Q2 2018 at prices between $168 and $190 and another ~28% increase last quarter at prices between $185 and $206. In December 2017, 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) and that transaction closed in November.

New Stakes:

Red Hat Inc. (RHT), Travelport (TVPT), Imperva Inc. (IMPV), Tribune Media (TRCO), and Stewart Information Services (STC): These are new merger arbitrage stakes established this quarter. In October, IBM (NYSE:IBM) agreed to buy Red Hat for $190 per share cash. The stock is currently at ~$183. Travelport is being taken private at $15.75 per share in a transaction announced in December. The stock is now at $15.74. In October, private equity firm Thoma Bravo agreed to acquire Imperva for $55.75 per share cash and that transaction closed last month. Nexstar Media (NXST) is buying Tribune Media in a $46.50 per share cash deal announced in December. In March, Fidelity National Financial (FNF) agreed to acquire Stewart Information Services in a $50 per share cash-and-stock (50% cash) deal. The stock is currently at $43.17.

Stake Decreases:

Mylan Inc. (MYL): MYL is a top five position at 7.22% 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 $47. The stock currently trades at $31.26.

Discovery Communications (DISCA): DISCA position saw a 320% stake increase in Q1 2018 at prices between $21.50 and $26.50 while next quarter there was a ~140% further increase at prices between $21 and $24. DISCA currently trades at $29.21 and the stake is now fairly large at 6.48% of the portfolio. There was a ~22% stake increase last quarter at prices between $25.50 and $32.25. This quarter saw a ~4% trimming.

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 last quarter at prices between $167 and $193. The stock is now at ~$137 and the stake is at 4.96% of the portfolio. This quarter saw a ~4% trimming.

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 in Q2 2018: almost two-thirds increase at prices between $92 and $120 and that was followed with a ~28% increase last quarter at prices between $85 and $110. The stock currently trades at $94.51. This quarter saw a ~9% trimming.

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.

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. The 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 last quarter at prices between $58 and $70.50. This quarter also saw a ~20% selling at prices between $61 and $70. The stock is now at $73.20.

International Seaways (INSW): 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 $18.11. There was ~6% trimming in Q2 2017 and that was followed with ~18% selling over the last two quarters at prices between $16 and $24.

Note: Paulson controls ~10% of International Seaways.

Viacom (VIAB): The 0.81% VIAB position saw a ~160% stake increase in Q1 2018 at prices between $29 and $34. This quarter saw a ~50% selling at prices between $25 and $34. The stock is now at $29.19.

Caesars Entertainment (CZR) and Office Depot (ODP): These very small (less than ~1% of the portfolio each) stakes saw significant selling this quarter.

Nielsen Holdings (NLSN): NLSN is a 0.76% position established last quarter at prices between $21.75 and $32 and reduced by ~60% this quarter at prices between $22 and $28. It currently trades at $26.10.

Mallinckrodt PLC (MNK): MNK is now a minutely small 0.23% of the 13F portfolio position. The original position was established in Q3 2013 at prices between $42 and $47. The stake has wavered. Recent activity follow: the seven quarters through Q4 2017 saw a combined ~60% reduction at prices between $21 and $81 and that was followed with a ~45% selling last quarter at prices between $19 and $36. The position saw another ~70% selling this quarter at prices between $15.80 and $31.60. The stock currently trades at $21.49.

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.

Stake Increases:

Shire PLC ADR (SHPG): The large 9.68% SHPG stake 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: combined ~57% selling in the next three years at prices between $127 and $227. Last two saw quarters saw minor increases.

Note: Shire plc got acquired by Takeda in a stock deal valued at $195 per share in a transaction that closed last month.

Twenty-First Century Fox (FOX): FOX stake was first purchased in Q4 2017 at prices between $24.50 and $34.75, but was almost sold out next quarter at prices between $34 and $38.50. Q2 2018 saw the position built back up to a ~1.5% portfolio position at prices between $35.70 and $50. This quarter saw an ~85% stake increase at prices between $44.50 and $49.50. The stock is now at $51.17.

Altaba Inc. (AABA) previously Yahoo: The 2.94% 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 $71.72. There was a ~23% stake increase this quarter at prices between $55.50 and $67.

Pandora (P): P is a 1.83% portfolio position established last quarter at prices between $6.75 and $10 and increased by ~130% this quarter at prices between $5.35 and $6.40. In September, Sirius XM (SIRI) agreed to acquire Pandora in an all-stock deal (1.44 shares of SIRI for each P held) and that transaction closed earlier this month. Sirius currently trades at ~$6.

BrightSphere Investment Group (BSIG): The vast majority of the 1.33% BSIG stake was purchased this quarter at prices between $10 and $13.30 and the stock currently trades at $14.03.

Randgold Resources (GOLD): The small ~1% portfolio stake in Randgold saw a ~27% increase last quarter at prices between $61 and $77 and another ~17% increase this quarter. It was a merger arbitrage stake. Barrick Gold acquired Randgold in an all-stock deal (6.128 shares of Barrick Gold for each Randgold share held) that closed last month.

Note: Barrick Gold changed their ticker symbol to GOLD from ABX after the deal for Randgold closed.

Kept Steady:

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 $125.50. The remaining stake is still the second-largest at 12.55% of the portfolio.

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 $23.75 and the stake has become the third-largest position in the portfolio at 9.22%.

Note: Paulson controls ~6% of Bausch Health.

AngloGold Ashanti (AU): AU is a ~4% 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 $14.85.

Note: Paulson controls ~3% of AngloGold Ashanti.

Horizon Pharma (HZNP): The 3.36% 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 $21.20. There was a ~3% trimming in Q1 2018 and that was followed with a ~7% selling last quarter.

DISH Network (DISH): DISH is a ~3% portfolio position established in Q1 2017 at prices between $58 and $64. Q2 and 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 $32.82. 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.

NovaGold (NG): NG is a ~2% 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 $3.93.

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

TIM Participacoes (TSU): TSU is a 1.84% 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 $16.41.

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 $10.51 and the stake is at 1.51% of the portfolio. There was a ~28% increase in Q1 2018 at prices between $5.50 and $9. Last quarter saw a ~6% trimming.

Agnico Eagle Mines (AEM), Brookdale Senior Living (BKD), International Tower Hill Mines (THM), and Newmark Group (NMRK): 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 Q4 2018:

John Paulson - Paulson & Company - Q4 2018 13F Report Q/Q Comparison

Disclosure: I am/we are long MYL, 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.