On December 22, 2011, John Paulson reduced his stake in American Capital, Ltd (ACAS) by 6.15%, bringing his total shares in the company to just under 32.85 million. The decrease is only Paulson’s latest with regard to ACAS.
John Paulson’s Paulson & Co. had initiated a 43,725,000 share position in the company in the second quarter of 2010, when the average share price in ACAS was $5.47. In the third quarter, when ACAS’s average share price was $8.84 a share, Paulson unloaded 4,914,141 shares in the company. The sale brought his total shares to 38,810,859 at the end of September.
Since then, Paulson has been selling off shares in ACAS periodically. He sold more than 10% of his stake in the company on October 4, 2011, then by just over 3%the next day, which brought his shares in ACAS down to 36,279,900. Paulson held that position until October 11, when he sold another 3.53% of his position to bring his total holding in the company to 35,000,000 shares. Now, he is cutting his stake in ACAS once again. Paulson sold off 6.15% of his stake in the company on December 22, bringing his position to 32,846,800 shares (see the complete SEC filing here). The average sale price was $7.15-$7.16 a share.
ACAS opened trading today at $7.01 a share. It is currently priced at 3.37 times its earnings. Analysts predict give the stock a one-year target estimate of $10-11, and recommend the stock as a sell, rating it 2.2 on a scale in which 1.0 means strong buy and 5.0 means sell. Analysts also predict the company’s earnings will outperform its industry over the next five years, growing by 15% per annum compared to industry expectations of 12.06% per annum. It doesn’t sound bad, but scratch the surface. ACAS’s third quarter net income was $464 million in the red, compared to $410 million at the end of the second quarter.