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John Paulson’s Stocks That Went Up During His Worst Year

December 01, 2011 | About:
Holly LaFon

Holly LaFon

257 followers
John Paulson has suffered his worst three quarters in his firm’s 17-year history. His flagship fund, the Paulson Advantage Ltd., was down 32.7% at the end of the third quarter, and others were similarly maimed. Paulson attributed the predicament largely to investors acting on fear caused from the macro situation. As a firm that positions its portfolio “with an eye to the overall macroeconomic environment,” this year he believes they simply failed to read it correctly. Paulson is still optimistic about the U.S. and equities, according to his third-quarter letter. While financial, hotel and real estate services equities dragged on his portfolio, others held up amid the assault. Three stocks in his portfolio that went up year to date are: Anadarko Petroleum Corp. (APC), News Corp (NWS) and RockTenn Co Cl A (RKT).

Anadarko Petroleum Corp. (APC)

Anadarko Petroleum Corporation is one of the world's largest independent oil and gas exploration and production companies. Majority of the company's total proved reserves are located in the U.S., primarily in the mid-continent (Kansas, Oklahoma and Texas) area, offshore in the Gulf of Mexico and in Alaska. Most of the company's production is domestic and the remainder is from Algeria. The company also owns and operates gas gathering systems in its U.S. core producing areas.

Anadarko’s earnings have been trending downward over the last several years, but on November 28 they announced a major new find in Mozambique of 662 net feet of natural gas, expanding the estimated recoverable resources range to 15 to 30 or more trillion cubic feet of natural gas. The company said that it believes this could be one of the most important natural gas fields discovered in the last 10 years. Another gas discovery in the Gulf of Mexico announced Thursday that should begin production next year, Reuters reports.

The company has also reached a settlement with BP(BP) to pay it $4 billion, or about $5 per share after tax, which will release all claims against each other related to the Deepwater Horizon oil spill. The settlement will clear most of the uncertainty about how much Anadarko owes or would have owed in the future to BP.

News Corp. (NWS)

John Paulson bought News Corp. added News Corp. to his portfolio in the third quarter, buying 14.7 million shares at an average price of $16.50. The stock has gone up 8.77% year to date.

News Corporation's diversified global operations include the production and distribution of motion pictures and television programming; television, satellite and cable broadcasting; the publication of newspapers, magazines, books; the production and distribution of promotional and advertising products and services; the development of digital broadcasting; the development of conditional access and subscriber management systems; and the creation and distribution of popular on-line programming.

News Corp. has grown its revenue at an annual rate of 9.5% in the last five years and its cash flow at 8.3% to a record $3.3 billion in 2011. It has assets of approximately $60 billion. In the third quarter its revenue grew 7% year over year, driven by a double-digit percentage affiliate revenue growth at its Cable Network Programming and Television segments and double-digit revenue growth at its Filmed Entertainment segment. Earnings declined from $.30 per share to $.28 per share, and total segment operating income grew 21$ to $1.39 billion.

The stock suffered over the summer when it came to light that one of its tabloids, News of the World, had been involved in illegally hacking into the phones of celebrities, politicians, families of dead troops, and many others. Its earnings dropped 5% in its first quarter, affected by $91 million in charges associated with closing down the UK paper. First-quarter net income fell to $738 million, compared to $775 million in the same period last year.

RockTenn Co Cl A (RKT)

RockTenn is one of North America’s leading manufacturers of paperboard, containerboard and consumer and corrugated packaging. The company operates locations in the United States, Canada, Mexico, Chile and Argentina.

Paulson bought 1 million shares of RockTenn in the first quarter and 3,437,754 in the second quarter, at an overall average cost of $68 per share. The stock is up 7.25% year to date.

For the year ended Sept. 30, 2011, RockTenn’s earnings per diluted share fell to $2.77 from $5.70 the previous year. It spend $1.32 per share on restructuring and other costs and operating losses and transition costs due to plant closures, compared to $.13 for the same expenses the previous year. Adjusted earnings equaled $5.50 per share.

The company’s acquisition of Smurfit-Stone helped offset higher commodity input costs. The stock also began going higher in early October when the company announced it reached an agreement to settle a class action lawsuit with Smurfit-Stone shareholders. RockTenn announced in January that it would acquire Smurfit-Stone Container Corp., creating what it called a “$9 billion leader in the North American paperboard packaging market.” Combined, the two companies will have 9.4 million tons of total production capacity, including 7.5 million tons of mill production in the containerboard market.

See more of John Paulson's portfolio here.


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