Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.
Today, let’s look at investing giant John Paulson. Founded in 1994 and owned by its employees, Paulson & Co. has specialized in merger arbitrage, wherein, among other things, it profits when one company buys or merges with another (or merely announces plans to do so). It has grown into one of the largest hedge fund companies in the world.
Is Paulson really worth paying attention to, though? Well, according to the folks at GuruFocus.com, Paulson gained about 264% over the 15 years through 2011, compared with just 124% for the S&P 500. That certainly gets my attention. His performance has faltered in recent years, however, in part due to his heavy position in gold. (That’s a good reminder that even the big guys are not perfect and that we should think twice before mindlessly following anyone.)
The company’s reportable stock portfolio totaled $14.2 billion in value as of June 30, 2013. Its biggest holding in the previous quarter was the SPDR Gold Trust, with about 19% of assets. That dropped to second place and 8.6% in this past quarter, with shares of Sprint Nextel taking the top spot. Gold has long had its advocates and critics (who include Warren Buffett), but as my colleague Dan Caplinger has noted, it all comes down to supply and demand.
So what does Paulson’s latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Thermo Fisher Scientific and T-Mobile US. Other new holdings of interest include Kodiak Oil & Gas Corp (USA) (NYSE:KOG) and Elan Corporation, plc (ADR) (NYSE:ELN). Kodiak Oil & Gas Corp (USA) (NYSE:KOG) recently bought 42,000 acres in the productive Bakken region, upping its assets there by 27% and adding thousands of new barrels of oil to its production levels. The company offers rapid growth (to the tune of triple-digit revenue growth rates) and seems to have more room to grow, with its forward P/E near 10. Bears worry that it might be too focused on the Bakken and not sufficiently diversified. It’s also increasing its share count, and has significant debt, which is likely to grow more as Kodiak Oil & Gas Corp (USA) (NYSE:KOG) continues investing heavily.
Ireland-based biotech company Elan Corporation, plc (ADR) (NYSE:ELN) is being bought by Michigan-based drug company Perrigo for $8.6 billion. One benefit for Perrigo will be headquartering the new company in Ireland, which will cut its tax rate from around 30% to around 17%. Elan Corporation, plc (ADR) (NYSE:ELN) had previously been pursued by Royalty Pharma, whose offers had been deemed too low. It has also been in the news as a stock that investors at the scandal-ridden hedge fund SAC Capital allegedly traded in with insider information.
Among holdings in which Paulson & Co. increased its stake were Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and oil and gas explorer Cobalt International Energy, Inc. (NYSE:CIE). Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), the world’s largest publicly traded copper producer, has been whacked by falling copper and gold prices, though its second quarter was solid, featuring estimate-topping earnings (and revenue a bit below expectations), along with vital cost cuts. Helping the performance considerably is its newly purchased pair of oil- and gas-producing companies. The company has been abandoned by many lately, but others see it as rather undervalued. Patient investors can collect a dividend yield near 4%.