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Billionaire John Paulson’s Favorite Healthcare Stocks Include The Latest Industry Punching Bag, Mylan

John Paulson is an American hedge fund manager and billionaire who founded his investment firm Paulson & Co in 1994 with only $2 million and one employee. By 2003, the fund’s assets had grown to $300 million. In 2006, Mr. Paulson started the famous ‘Credit Opportunities Fund’, which mainly bet against subprime mortgages. John Paulson made around $4 billion and cemented his status in the investment world through those bets. In 2010, he achieved another milestone by personally making $5 billion. However, Paulson & Co’s later bets on gold and the Euro cost the fund dearly, and its assets fell to $19.3 billion as of March 31, 2015, from $38 billion in 2011.

According to its latest 13F filing, Paulson & Co manages a U.S. equity portfolio containing positions valued at $9.84 billion, and greater than half of that amount is dedicated to stocks from the healthcare sector. In this article, we’ll analyze Paulson & Co’s biggest healthcare stock-related moves in the second quarter.

Through extensive research, we have determined that the best approach to outperform the broader indices is to follow hedge funds into their top small-cap ideas. In our backtests, a portfolio of the 15 most popular small-cap stocks generated monthly alpha of 81 basis points, versus 0.7 percentage points posted by hedge funds’ top large- and mega-cap picks (see more details here).best gold ETF

Mallinckrodt PLC (NYSE:MNK)

– Shares Owned by Paulson & Co (as of June 30): 8.38 million

– Value of Paulson & Co’s Holding (as of June 30): $508.79 million

Paulson & Co decreased its position in Mallinckrodt PLC (NYSE:MNK) by 6% during the second quarter, selling 578,300 shares of the company and ending the quarter with a stake valued at $508.79 million. On Wednesday, Mallinckrodt announced that it has agreed to sell its nuclear-imaging business to IBA Molecular for roughly $690 million before tax impacts, out of which $574 million will be paid as an upfront payment. Mallinckrodt CEO Mark Trudeau said that the deal shows the company’s increasing focus on the high-growth specialty pharmaceutical sector. Mallinckrodt PLC (NYSE:MNK)’s stock is up by over 6% so far this year.

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Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)

– Shares Owned by Paulson & Co (as of June 30): 16.77 million

– Value of Paulson & Co’s Holding (as of June 30): $842.55 million

Paulson & Co sold 3.83 million shares of Israel-based pharmaceutical company Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) during the three-month period ended June 30, ending the quarter with an $842.55 million stake in the company. Teva’s shares have been falling ever since the U.S. Patent Office invalidated its two patents for Copaxone 40 mg, a multiple sclerosis drug that accounts for 20% of the company’s revenue. Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) earned $1.25 per share on $5 billion in revenue for the second quarter, ahead of the Street’s forecasts of $1.20 in EPS on $4.87 billion in revenue. The company expects to earn between $5.20 and $5.40 per share for the full year. Andreas Halvorsen’s Viking Global owns 27.74 million shares of Teva as of June 30.

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On the next page we’ll discuss some more healthcare stock picks made by John Paulson in the second quarter.