Billionaire John Paulson’s Small Cap Picks Include Caesars Entertainment Corp (CZR)

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Telecommunications and media company Cablevision Systems Corporation (NYSE:CVC) was another of Paulson’s small cap picks with the filing disclosing ownership of almost 17 million shares. The company, whose assets include Clearview Cinemas and Newsday, also looks pricy in terms of its earnings multiples: its forward P/E, for example, is over 30. Cablevision has been making significant dividend payments for the past several years, and its current yield is about 4%. Income investors might want to consider it on that basis but should also be sure that the stock is not too expensive.

Paulson and his team increased their stake in Popular Inc (NASDAQ:BPOP), a bank operating in Puerto Rico and in select markets in the United States. Even after a 90% increase in the stock price over the last year, Popular trades at a considerable discount to the book value of its equity with a P/B ratio of 0.8. While the business has been struggling recently, Popular is also a value in terms of consensus earnings forecasts for 2014 with analyst projections implying a forward earnings multiple of 9. We think that the bank could be considered alongside other cheap regional banks.

Rounding out our list of Paulson’s small cap picks is troubled casino Caesars Entertainment Corp (NASDAQ:CZR). The company is not expected to be profitable either this year or next year, with losses per share forecasts being quite high. 29% of the float is held short as many market players worry about the struggling business and its very high leverage. Even for the casino industry- where the profitable players carry high earnings multiples- we think that the market looks too optimistic on Caesars if anything. Billionaire George Soros owned 5.7 million shares of the stock at the end of March (check out Soros’s stock picks).

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

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