Billionaire John Paulson Traded Gold For Family Dollar Stores, Inc. (FDO) Last Quarter

During the second quarter of 2013, billionaire John Paulson’s Paulson & Co. cut its holdings of the GLD ETF by about half as the fund accepted that gold (which is down about 20% year to date) might not rise as much on the Federal Reserve’s monetary policy as bulls had thought. By consulting Paulson’s 13F compared to his previous one (check out Paulson’s favorite stocks over time), we can see if the fund has any interesting ideas which investors may want to take a closer look at. We track 13Fs as part of our work developing and implementing investment strategies- we have found that the most popular small cap stocks among PAULSON & COhedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy), and our own portfolio following this strategy beat the market by 33 percentage points in the last 11 months. Here are some things we noticed in our analysis of Paulson’s most recent filing:

Family Dollar. Between April and June, Paulson increased his stake in Family Dollar Stores, Inc. (NYSE:FDO) by about 50%, to a total of 7.4 million shares. In its most recent quarter (which ended in early June), an increase in the retailer’s comp sales (and therefore revenue) was offset by higher costs resulting in a slight decrease in operating income and earnings. With a trailing P/E of 20 we would be concerned over any sign that Family Dollar Stores, Inc. (NYSE:FDO) might be having trouble growing its business, and given these results we might prefer to look at other dollar stores or discount retailers instead. Billionaire Nelson Peltz’s Trian Partners sold some of its stake in Family Dollar Stores, Inc. (NYSE:FDO) last quarter but still reported a significant position in the company (find Peltz’s favorite stocks).

Selling Equinix. In addition to the gold ETF, Paulson and his team reduced their ownership of Equinix Inc (NASDAQ:EQIX), the $8.2 billion market cap data center services company, by about half to 1 million shares. Equinix Inc (NASDAQ:EQIX) is quite a speculative name: even with Wall Street analysts predicting an increase in earnings per share next year, the forward P/E is 41. Revenue was up 15% in the second quarter of 2013 versus a year earlier, but operating income actually grew at a slower rate than that. 25% of the float is held short as many market players are skeptical that growth rates will increase.

Holding on to acquirers. Much of the fund’s activity is based on merger arbitrage, but the 13F shows it maintaining much of its stake in the acquiring company post close. Paulson’s ownership of Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) increased by about 7 million shares during Q2, fairly close to the number of shares the fund had received after the company purchased Plains Exploration and Production (which had been one of its top five stock picks). Many investors had been concerned that Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) would lose operational focus after adding Plains and another oil and gas company, but Paulson apparently disagrees. Currently Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is valued at 10 times forward earnings estimates, and while still down considerably year to date is up about 10% from its lows in late June. Billionaire Leon Cooperman’s Omega Advisors has also been bullish on the stock (see Cooperman’s stock picks).

Interestingly, the fund also dumped many of its shares of Life Technologies Corp. (NASDAQ:LIFE) in exchange for a position of 5.7 million shares in Thermo Fisher Scientific Inc. (NYSE:TMO), which has agreed to acquire Life Technologies Corp. (NASDAQ:LIFE) in an all cash deal. The forward P/E at Thermo Fisher Scientific Inc. (NYSE:TMO), a $33 billion market cap technical equipment and instruments company, is 16 and in the second quarter of 2013 the company reported rising revenue and earnings. T MOBILE US INC (NYSE:TMUS) was another recent acquirer of a Paulson position (in MetroPCS) which was among the fund’s largest holdings at the beginning of July.

We’re not sure how much more upside there is in Freeport-McMoRan, and we are wary of the company’s integration risks (though we would note that insider buying activity has continued to be high in recent weeks). Equinix Inc (NASDAQ:EQIX) seems to be a highly speculative investment at this point, given its valuation and its good-but-not-great recent results, and so we would recommend avoiding it. Family Dollar Stores, Inc. (NYSE:FDO) also doesn’t seem like a buy at this time considering where it trades compared to its peers.

Disclosure: I own no shares of any stocks mentioned in this article.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!