Billionaire John Paulson’s Long-Term Bets: Time Warner Cable Inc, Mallinckrodt PLC and More

Hedge funds trade in and out of stocks but they also have some core holdings that they keep in their portfolios for long periods of time. We have extracted the most valuable long term holdings of John Paulson‘s Paulson & Co in terms of their portfolio contribution, as of the latest 13F filing with the Securities and Exchange Commission. Of these picks, Time Warner Cable Inc (NYSE:TWC) and Mallinckrodt PLC (NYSE:MNK) made their debut in the third quarter of 2013, while a position in Shire PLC (ADR) (NASDAQ:SHPG) was initiated in 2012.


Paulson & Co is not your ordinary hedge fund in terms of its management’s investment philosophy. The firm specializes in event-driven arbitrage strategies, including merger arbitrage, bankruptcy reorganizations and distressed credit, structured credit, recapitalizations, restructurings, and other corporate events. Paulson founded the firm in 1994 after serving as a general partner at Gruss Partners and a managing director in mergers and acquisitions at Bear Stearns. Around 43% of the firm’s holdings are in the healthcare sector, thus it is no surprise that two of the companies in our list are healthcare stocks. The market value of the fund’s portfolio stood at $19.36 billion at the end of the fourth quarter.

Two of the stocks we presented in this article are large cap companies, but our research has shown that they are not the best way to follow the hedge funds. After analyzing hedge funds’ 13F filings between 1999 and 2012 we uncovered that 50 of the most popular hedge fund picks during this period underperformed the S&P 500 Total Return Index by nearly 7 basis points per month. However, the 15 most popular small cap stocks among hedge fundshave outperformed the market by nearly a percentage point during the same period. The same strategy also beat the S&P 500 ETF (SPY) by 76.7 percentage points since August 2012 (through March 2015).

Moving on to Paulson’s largest holding, represented by Shire PLC (ADR) (NASDAQ:SHPG) which comprised 9.14% of the portfolio value. The company’s stake was reduced by about 717,700 shares to 8.33 million shares valued at $1.77 billion. A stake was initiated in the company during the third quarter of 2013 by purchasing some 1.37 million shares valued at $121.59 million. The stock is up nearly 155% since then. Shire PLC (ADR) (NASDAQ:SHPG) was looking to bid for Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) in February, but Valeant Pharmaceuticals Intl Inc (NYSE:VRX) almost sealed the deal with $10.1 billion before Shire could come through. However, the $46.98 billion Shire PLC did manage to complete its $5.2 billion acquisition of NPS Pharmaceuticals in February.

The high merger and acquisition activity of  the biopharmaceutical company makes it a perfect candidate for Paulson’s investment philosophy. Among 700+ hedge funds that we track at Insider Monkey, the interest in the company has significantly decreased to only 54 funds having an aggregate investment of $3.71 billion as opposed to 75 funds with $7.78 billion a quarter earlier. Samuel Isaly of Orbimed Advisors had 1.17 million shares valued at $248.67 million in his portfolio.

Time Warner Cable Inc (NYSE:TWC) represents the second most valuable long term investment in Paulson’s portfolio. After an 18% increase in the company’s stake during the fourth quarter, the holding amounted to about 8.67 million shares valued at $1.32 billion. During the third quarter of 2013 Paulson purchased  4.0 million shares valued at $446.4 million of Time Warner to his portfolio. The provider of video, high-speed data and voice services in the United States appreciated by nearly 108% since then. Chris Hohn’s Children’s Investment Fund held the highest number of Time Warner Cable Inc (NYSE:TWC) shares (9.87 million valued at $1.5 billion), among the hedge funds that we track.

Comcast Corporation (NASDAQ:CMCSA) placed a bid to acquire Time Warner Cable Inc (NYSE:TWC) for $45.2 billion in February last year. The two companies are still awaiting permission from Federal Communications Commission and United States Department of Justice in relation to the public interest statement that they filed in April 2014. It is expected that a decision will be reached over the next few weeks. Time Warner Cable Inc (NYSE:TWC)’s fourth quarter results were a little towards the disappointing side as residential video customers continued to decline. However, revenue growth in business services and advertisement was enough to push the operating income up by 4.5% from last quarter. Earnings per Share (EPS) of $2.03 missed estimates by $0.06 and revenues of $5.79 billion were $20 million lighter than expected.

Our final entrant on the list, Mallinckrodt PLC (NYSE:MNK) is a $13.92 billion global specialty pharmaceuticals company. Paulson added a meager 12,300 shares to his stake, which stood at 9.01 million shares valued at $892.49 million at the end of 2014. Back when the company had its debut in Paulson’s portfolio, the fund held 5.64 million shares. With a 154% increase in stock price, this is another of Paulson’s long term picks that has gained considerable value during this time. Billionaire David Shaw’s D.E. Shaw owned about 1.38 milllion shares valued at $136.91 million at the end of 2014.

Mallinckrodt PLC (NYSE:MNK) hasn’t failed Paulson on the M&A front this year as the company bought the privately held Ikaria for nearly $2.3 billion this month. The deal is expected to add $150 million to Malinckrodt’s top line and $0.25 to EPS.

Disclosure: none