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Tracking John Paulson's Paulson & Company Portfolio - Q2 2019 Update

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Includes: AABA, ABBV, AEM, AGN, APC, ARRY, AU, BHC, BID, BMY, BSIG, CELG, CNC, CZR, DIS, DISCA, DISH, ENDP, FISV, FMCC, FNMA, FOX, GDX, GLD, GOLD, HZNP, INSW, LYFT, MYL, NG, ONCE, OSG, OXY, PCG, PCRX, PFE, RHHBY, RHT, S, STC, TAK, THM, TMQ, TMUS, TRCO, TSLA, TSU, TVPT, VIAB, VSM, WCG
by: John Vincent
Summary

John Paulson's 13F portfolio value increased from $4.59B to $5.88B this quarter.

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

Paulson added short positions in Tesla and the VanEck Gold Miners ETF by purchasing Puts. The large long position in the SPDR Gold Trust ETF is maintained.

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 08/14/2019. 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 Q1 2019.

This quarter, Paulson's 13F portfolio value increased ~24% from $4.59B to $5.88B. There are 51 13F securities in the portfolio although only 38 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 the SPDR Gold ETF (NYSEARCA:GLD), Bausch Health (NYSE:BHC), Allergan plc (NYSE:AGN), Discovery Communications (NASDAQ:DISCA), Celgene Corp. (NASDAQ:CELG) and they add up to ~36% 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".

Note: Paulson & Company is known to have a huge position in Fannie/Freddie (OTCQB:FNMA) (OTCQB:FMCC) although the details have not been disclosed.

Stake Disposals

Fox Corp. (FOX): The original position was a merger-arbitrage stake in Twenty First Century Fox purchased in Q2 2018 at prices between $35.70 and $50. Q4 2018 saw a ~85% stake increase at prices between $44.50 and $49.50. In December 2017, Walt Disney Company (DIS) agreed to acquire the film & entertainment assets of Twenty First Century Fox and that transaction closed this March. What remained (broadcasting networks and stations, news channel, business network, and Sports - FS1 and FS2, Fox Deportes, and Big Ten Network) became Fox Corp. Terms of the transaction were ~$38 per share in cash or Disney stock subject to collar and one-third of one-share of new Fox for each share of Twenty First Century Fox. The stake was eliminated this quarter at prices between $33.50 and $39. The stock is currently at $32.45.

Centene Corp (CNC): Centene is acquiring WellCare Health Plans (NYSE:WCG) in a cash-and-stock deal (3.38 shares of Centene and $120 cash for each share of WellCare Health Plans held) that was announced in late March. WCG and CNC currently trade at ~$270 and $46.32 respectively. Last quarter, Paulson built almost equal positions in both. The Centene stake was disposed this quarter.

Travelport Worldwide (TVPT): Travelport went private at $15.75 per share in a transaction that closed in May. The transaction was announced last December and Paulson's 1.33% merger-arbitrage stake came about soon after.

Bristol-Myers Squibb (BMY) Calls and First Data Corp.: These were very small new stakes (less than ~1% of the portfolio each) established last quarter. First Data Corp. got acquired by Fiserv (FISV) in an all-stock deal (0.303 shares of FISV for each share First Data Corp. held) and that transaction closed last month. Bristol-Myers Squibb is acquiring Celgene. Paulson acquired a large ~5% stake in Celgene and a small ~1% stake in BMY through calls last quarter. The calls were disposed this quarter.

New Stakes

Anadarko Petroleum (APC): APC was a large 5.18% merger-arbitrage stake established this quarter. Occidental Petroleum (OXY) agreed to acquire Anadarko in a cash-and-stock deal ($59 cash and 0.2934 shares of OXY for each APC held) announced in May. The transaction closed earlier this month.

Sotheby's (BID) and Array Biopharma (ARRY): BID and ARRY are medium-sized merger-arbitrage stakes established this quarter. BID is being taken private at $57 per share by a group headed by Patrick Drahi. Pfizer (PFE) is acquiring Array Biopharma in a $48 per share all-cash deal announced in June.

Tesla (TSLA) Puts: The ~2% of the portfolio short stake in TSLA through Puts was established this quarter as the stock traded between $179 and $292. It currently trades at $222.

Spark Therapeutics (ONCE) and PG&E Corp. (PCG): ONCE is a merger-arbitrage stake established this quarter at prices between $97.50 and $114 and the stock currently trades at ~$100. Roche (OTCQX:RHHBY) is acquiring Spark Therapeutics in a $114.50 all-cash deal announced in February. The ~1% of the portfolio stake in PCG was purchased at prices between $17 and $24 and it is now at $10.43.

Stake Decreases

Altaba Inc. (AABA) previously Yahoo: The 2.24% 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. There was a ~23% stake increase in Q4 2018 at prices between $55.50 and $67 and that was followed with a ~12% increase last quarter. This quarter saw a ~20% selling at prices between $59 and $79. It is now at $69.48.

Red Hat Inc. (RHT): RHT was a 0.61% of the portfolio merger arbitrage stake established in Q4 2018 and increased by ~12% last quarter. In October, IBM (NYSE:IBM) agreed to buy Red Hat for $190 per share cash and that transaction closed last month.

International Seaways (INSW): INSW position came about as a result of its spin-off from Overseas Shipholding Group (OSG) that started regular-way trading in December 2016 at ~$15 per share. It is now at $17.22. There was ~6% trimming in Q2 2017 and that was followed with ~18% selling in H2 2018 at prices between $16 and $24. Last two quarters have seen another ~45% selling at prices between $16.50 and $20.25.

Note: Paulson controls ~5% of International Seaways.

Stewart Information Services (STC): The minutely small 0.37% portfolio stake in STC saw a ~10% trimming during the quarter.

Stake Increases

Allergan plc: 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. H2 2018 also saw a ~18% selling at prices between $131 and $192. There was an about-turn this quarter: ~45% stake increase at prices between $116 and $168. The stock is now at ~$160 and the stake is at 6.40% of the portfolio.

Note: AbbVie (ABBV) is buying Allergan in a cash-and-stock deal ($120.30 cash and 0.8660 shares of ABBV for each AGN held) announced in June.

Celgene Corp.: CELG is a large (top five) 5.26% merger-arbitrage stake established last quarter. Bristol-Myers Squibb is buying Celgene in a cash-and-stock deal ($50 cash and 1 share of BMY for each share of CELG held). CELG currently trades at $97.11. There was a marginal stake increase during the quarter.

WellCare Health Plans: Centene is acquiring WellCare Health Plans in a cash-and-stock deal (3.38 shares of Centene and $120 cash for each share of WellCare Health Plans held) that was announced in late March. WCG is currently at ~$270. Paulson bought the merger-arbitrage stake last month and increased it by ~85% during the quarter at prices between $247 and $299.

VanEck Vectors Gold Miners (GDX) Puts: The vast majority of the 2.82% Short position in GDX through Puts was purchased during this quarter as the underlying traded between $20 and $26. GDX currently trades at $29.66.

Pacira Biosciences (PCRX), Sprint (S), Trilogy Metals (TMQ), and Versum Materials (VSM): These small (less than ~1% of the portfolio each) positions were increased during the quarter. The TMQ increase was due to the execution of warrants at $1.52 per share.

Kept Steady

SPDR Gold Trust: 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 ~$144. The remaining stake is still the largest at ~10% of the portfolio.

Bausch Health Companies, 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 a ~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 $21.51 and the stake has become the second-largest position in the portfolio at ~9%.

Note: Paulson controls ~6% of Bausch Health.

Discovery Communications: 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 $27.73 and the stake is now fairly large (top five) at 5.28% of the portfolio. There was a ~22% stake increase in Q3 2017 at prices between $25.50 and $32.25. Last two quarters had seen a combined ~12% trimming.

Takeda Pharma (TAK): The fairly large ~4% TAK stake came about as a result of Takeda's Shire plc (NASDAQ:SHPG) acquisition in a cash-and-stock deal ($90.99 cash and 5.034 shares of TAK for each share of SHPG held). Paulson had a ~10% portfolio stake in Shire plc for which he received these shares after that transaction closed in January. Takeda currently trades at $16.56.

BrightSphere Investment Group (BSIG): The ~4% BSIG stake was built in Q4 2018 at prices between $10 and $13.30. Last quarter saw a huge ~285% stake increase at prices between $11 and $14.25. The stock currently trades below those ranges at $9.06.

Note: Paulson's ownership stake in BSIG is ~22%.

AngloGold Ashanti (AU): AU is a 3.87% 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 $22.54.

Note: Paulson controls ~3% of AngloGold Ashanti.

Mylan Inc. (MYL): MYL stake is now at 3.56% 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. 2017 and 2018 had seen a ~50% selling at prices between $30.50 and $47. The stock currently trades near the low end of those ranges at $19.90.

DISH Network (DISH): DISH is a 3.25% 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 well below the low end of those ranges at $33.77. There was a ~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.

Lyft Inc. (LYFT): LYFT is a 2.77% of the portfolio position. LYFT had an IPO in March. Shares started trading at ~$78 and currently go for ~$50. Paulson is an early investor in Lyft having participated in funding rounds prior to the IPO.

Horizon Pharmaceuticals (HZNP): The 2.73% 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 $27.55. There was a ~3% trimming in Q1 2018 and that was followed with a ~7% selling in Q3 2018. Last quarter also saw a ~7% trimming.

T-Mobile US (TMUS): The 2.46% 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 in Q3 2018 at prices between $58 and $70.50. Q4 2018 also saw a ~20% selling at prices between $61 and $70. The stock is now at ~$78.

NovaGold (NG): NG is a 2.21% 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 $7.42.

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

TIM Participacoes (TSU): TSU is a 1.27% 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 $14.59.

Viacom (VIAB): The 0.67% VIAB position saw a ~160% stake increase in Q1 2018 at prices between $29 and $34. Q4 2018 saw a ~50% selling at prices between $25 and $34. The stock is now at $25.16.

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 $2.46 and the stake is at 0.60% of the portfolio. There was a ~28% increase in Q1 2018 at prices between $5.50 and $9.

Agnico Eagle Mines (AEM), Barrick Gold (NYSE:GOLD), Caesars Entertainment (CZR), International Tower Hill Mines (THM), and Tribune Media (TRCO): These minutely small (less than ~0.50% of the portfolio each) stakes were kept steady this quarter.

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

The spreadsheet below highlights changes to Paulson's US stock holdings in Q2 2019:

John Paulson - Paulson & Company

Disclosure: I am/we are long ABBV, MYL, OXY. 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.

Additional disclosure: We are long Fannie/Freddie pfds.