In mid May, billionaire John Paulson’s Paulson & Co. filed its 13F with the SEC, disclosing many of its long equity positions in U.S. stocks as of the end of March. We track hundreds of 13Fs from hedge funds and other notable investors as part of our work researching investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). We can also use this database in conjunction with our records of insider trading activity to find stocks which insiders have been buying in an individual manager’s portfolio. Read on for our thoughts on the five largest positions in Paulson’s portfolio which at least one insider has bought in the last three months or see Paulson’s previous filings.
Multiple insiders have been buying Hess Corp. (NYSE:HES), including two in mid May; Paulson initiated a position of 2.7 million shares in the first quarter of 2013. Hess is making progress towards becoming more of a pure-play upstream oil and gas company- possibly encouraged in this endeavour by recent calls to do so from billionaire Paul Singer’s Elliott Management. Currently Hess trades at 11 times forward earnings estimates. While that valuation is fairly low in absolute terms, it’s quite ordinary for large oil and gas companies in the current market environment. With business up we think the company might be worth watching for further results.
The fund was increasing its holdings of Radian Group Inc (NYSE:RDN) and reported ownership of about 12 million shares at the end of March. An officer at the $2.3 billion market cap mortgage insurance company bought a small number of shares at the beginning of that month, satisfying the insider purchase criterion. While the stock is unprofitable on a trailing basis, it has risen over 400% in the last year. While analysts are looking for earnings per share to be significant in 2014 (the forward P/E is 13) the most recent data shows that 25% of the float is held short.