How To Trade Like John Paulson
Paulson & Co. Inc., the hedge fund managed by billionaire John Paulson, has been in news of late. In August, Merrill Lynch advised its clients to withdraw $80 million invested in Paulson's Advantage fund due to poor performance. However, Paulson's merger funds, which constitute a large portion of the total $21.69 billion of assets managed by the firm, had performed very well in the first half of 2015. Now, we look at some of the recent investment moves by Paulson & Co., Inc.
In the most recent quarter, Paulson & Co. increased its holdings in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) by 339%. At 10.05%, Valeant Pharma is the largest stock in Paulson's portfolio. In the past week, shares of Valeant Pharma have increased by 7.31%. In the last four weeks alone, the company's stock has increased by 8.98%, outperforming the S&P 500 by 22.02%. On August 6, the company's shares hit a one-year high of $263.81.
The key factor behind this growth is the recent acquisition deals signed by the company. Year-to-date, the company has signed six acquisition deals, three of which were announced within the past two months.
Valeant is not the only healthcare company that has piqued Paulson's interest. In terms of new additions, Paulson recently added Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), a global pharmaceutical company, to his portfolio. His current holdings in Teva are valued at $128.65 million. The company last reported its earnings results on July 30th, 2015, posting EPS of $1.43 for the quarter; $0.12 higher than consensus EPS estimates of $1.31.
Paulson is not alone in his bullish views on Valeant and Teva. According to TipRanks, seven analysts are bullish on VRX with an average price target of $288.86, marking an 18% potential upside from current levels. Teva has recorded 12 bullish analyst and one neutral analyst with a bullish price target of $79.75, marking a 25% potential upside.
While Paulson is grabbing up healthcare stocks, his hedge fund seems to be shedding commodities such as AngloGold Ashanti Limited (ADR) (NYSE:AU) (by 0.68%) and Whiting Petroleum Corp (NYSE:WLL) (by 0.24%). Anglogold Ashanti is a gold mining and exploration company. As per its latest earnings data released on August 17th, the company had reported EPS of $0.06, which was higher than consensus estimates of between $0.02 and 0.04.
Whiting Petroleum Corporation is an independent oil and gas company. In the last three months, the company's stock has dropped by more than 48%. Some of the reasons behind this drop are slow EPS growth, and weak performance in terms of net income, return on equity, and operating cash flow.
John Paulson's hedge fund has earned an average return over the past three years, annualized, of +9.15%. In the last quarter alone Paulson's hedge fund portfolio has earned an average return of +4.94%.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.