Billionaire John Paulson’s Shakeups: Sprint Nextel Corporation (S), Freeport-McMoRan Copper & Gold Inc. (FCX), Delphi Automotive PLC (DLPH)

Published on March 15, 2013 at 10:37 am by The Motley Fool in Hedge Funds

Billionaire John Paulson manages one of the world’s largest hedge funds, Paulson & Co., with around $29 billion in assets under management. Paulson focuses on event and distressed strategies. After reviewing John Paulson’s latest buys and sells from the fourth quarter, here are a few things that stuck out (see all the stocks Paulson owns).

Paulson’s New Additions

One of Paulson’s new additions includes Sprint Nextel Corporation (NYSE:S). The hedge fund now owns 127 million shares, and it is Paulson’s third largest holding. Sprint has been busy of late, having Softbank take a 70% stake for $20.1 billion, then using that capital to make a bid for the remaining shares of Clearwire it doesn’t already own (see how Dish is shaking up the Clearwire deal).

The valuation for Sprint Nextel Corporation (NYSE:S) is also rather compelling. Although Sprint doesn’t offer investors a 5% dividend yield that other major telecoms AT&T and Verizon offer, it does appear to offer investors the potential for price appreciation assuming it can complete its Clearwire acquisition and build out its spectrum, which will in turn should allow the company the ability to trade more in-line on with major peers. As of now the telecom trades well below its peers:

Price to Sales Ratio

AT&T 1.7

Verizon 1.2

Sprint 0.5

Cablevision Systems Corporation (NYSE:CVC) was one of Paulson’s big increases, upping his stake 478% and putting the cable system operator as twenty-first in his portfolio. Cablevision is the fifth largest U.S. cable system operator, offering cable, internet and voice services to nearly 3.2 million subscribers in New York City and certain Western states.

However, Cablevision has seen significant stock pressure following Hurricane Sandy…

There is still the possibility that the super-storm could impact 2013 subscriber growth, which has in part lead to the stock’s fall. Yet, the company pays a nice dividend yield at 4.3% and has increased its dividend payments by roughly 16% annually over the last three years.

Paulson sold off 46% of his Delphi Automotive PLC (NYSE:DLPH) stake during the fourth quarter, dropping the stock from third in his portfolio to tenth. Delphi Automotive PLC (NYSE:DLPH) is a great play on the rebounding auto industry (see other derivative plays), so why the selloff by Paulson? Well, it is likely that it is partly due to the run up in its stock price, up over 30% during the last twelve months.

Paulson’s merger-arb plays

Paulson also appears to have taken an interest in the merger-arb game, buying up Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and both its acquisition targets, Plains Exploration & Production Company (NYSE:PXP) and McMoRan Exploration. Freeport-McMoRan Copper & Gold Inc. (FCX) is now Paulson’s seventh largest holding, Plains his fifteenth and McMoRan seventeenth. Freeport has been pressured after the announcement, but Plains and McMoRan are up nicely.

Freeport-McMoRan Copper & Gold Inc. (FCX) has been great at exploring and developing cooper and gold assets, and now it plans to put those skills to work in the oil and gas field. The pro forma for the “new” Freeport will still be mining heavy, with 75% of revenue from mining, but it will add more diversity to revenue, with an expected 25% from oil and gas operations.

The deal terms include Freeport paying $6.9 billion in cash and stock for Plains, where the offer consists of $25 a share in cash and 0.6531 of a Freeport share. This values Plains at around $55.35, which is about 19% higher than the stock’s current trading price. Worth noting is that Plains has an unimpressive balance sheet, with $217 million in cash, but $4.5 billion in debt. This has been in part due to its aggressive exploration and development programs.

Don’t be fooled

Billionaire John Paulson made a fortune on his subprime mortgage bet, and now he has long been actively involved in merger-arb. Related to mergers, Paulson is not a fan of the proposed MetroPC-T Mobile deal (check out Paulson’s opposition). However, he has placed his bets on the Freeport-McMoRan Copper & Gold Inc. (FCX) deal, suggesting he is confident the deal will be done and that it will indeed be a long-term positive for Freeport. Meanwhile, Paulson also appears to be positive on Sprint Nextel Corporation (NYSE:S) following the Softbank investment, and he likes the dividend play that is Cablevision, but sold off almost half his stake in Delphi Automotive PLC (NYSE:DLPH) after the company saw a large run up in its stock (check more of Paulson’s newest picks).

The article Billionaire John Paulson’s Shakeups originally appeared on Fool.com and is written by Marshall Hargrave.

NYSE:S NYSE:CVC NYSE:FCX NYSE:PXP NYSE:DLPH Sprint Nextel Corp (S)Delphi Automotive PLC (DLPH)Cablevision Systems Corp (CVC)John Paulson - Paulson & Co.Plains Exploration & Production Co (PXP)Freeport-McMoRan Copper & Gold Inc. (FCX)Show more...Show less

Billionaire John Paulson’s Shakeups: Sprint Nextel Corporation (S), Freeport-McMoRan Copper & Gold Inc. (FCX), Delphi Automotive PLC (DLPH)

Published on March 15, 2013 at 10:37 am by The Motley Fool in Hedge Funds

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