John Paulson started his hedge fund, Paulson & Co., in 1994 using a merger arbitrage strategy. His strength lies in big macro bets, such as his famous short on subprime mortgage securities during the financial crisis. Here, we will explore his top small cap stock holdings (with market caps between $1 and $5 billion) within his $20 billion equity portfolio.
Houghton Mifflin Harcourt Co. (NASDAQ:HMHC) is Paulson’s largest small cap holding, with his 30.9 million shares worth $524 million. His investment in the $2.9 billion market cap education solutions provider, which makes him the largest shareholder, was made during the fourth quarter of 2013. Other investors with a bullish view on the stock include Geoffrey Raynor of Q Investments (Spector Holdings), Marc Lasry of Avenue Capital and Kevin Ulrich of Anchorage Advisors.
Paulson’s second largest small cap stock holding is Cablevision Systems Corp. (NYSE:CVC), with a 21.0 million share position valued at $377 million. His 7.8% stake in the $4.8 billion market cap cable system operator makes him its fifth largest shareholder overall, joining other bullish investors such as Casey Gard of Calypso Capital Management, Richard Patton of Courage Capital and Eric Semier of TCS Capital Management.
Third on the list is Oasis Petroleum Inc. (NYSE:OAS), with Paulson’s 7.4 million shares worth approximately $348 million. He increased his stake in the $4.4 billion independent oil and natural gas E&P (exploration and production) company by more than sevenfold during the fourth quarter. Other shareholders include Vince Maddi and Shawn Brennan of Sir Capital Management, Paul Jasinkiewicz of Jasinkiewicz Capital Management and Anthony Giammalva of Sound Energy Partners.
Mallinckrodt PLC (NYSE:MNK) is Paulson’s fourth largest small cap stock position, with a 5.6 million share stake valued at $295 million. The Dublin-based pharmaceutical company, with a market cap of $3.7 billion, has been in his portfolio since the third quarter of 2013. Other hedge fund managers who own the stock include Alex Denner of Sarissa Capital Management, Stephen Dubois of Camber Capital Management and Roberto Mignone of Bridger Management.
Paulson’s fifth largest small cap holding is Kodiak Oil and Gas Corp. (NYSE:KOG), in which he owns 26.0 million shares worth approximately $291 million. He is the largest shareholder of the $3.4 billion market cap company, which is engaged in the acquisition, exploration, exploitation, development and production of crude oil and natural gas in the Rocky Mountain region. Other hedge fund managers that own the stock include Ken Griffin of Citadel Investment Group, Israel Englander of Millennium Management and Phill Gross and Robert Atchinson of Adage Capital Management.