After losing 50% in his Advantage Plus Fund last year primarily by overestimating the rate of the U.S. economy’s recovery, John Paulson was down 10% in the first half of 2012. It has been a drastic change from the 591% returns in the subprime crisis that propelled him to the spotlight in 2007.
Paulson continues to like gold in the third quarter, as the SPDR Gold Trust ETF (GLD) and Anglogold Ashanti Litd. (NYSE:AU) combined make up 38.7% of his portfolio. He also bought stock in 15 new companies. The biggest new picks are MetroPCS Communications (PCS), Nexen Inc. (NYSE:NXY), Shire Plc (NASDAQ:SHPG), Amerigroup Corp. (AGP) and Robbins & Myers Inc. (RBN).
MetroPCS Communications (PCS)
Paulson purchased 23.8 million shares of MetroPCS Communications for $9 per share on average, giving him 6.55% of the company. MetroPCS’ stock price gained 17% year to date.
MetroPCS, the fifth largest facilities-based wireless broadband provider in the U.S. with 9 million subscribers, offers service plans to major metropolitan areas that are tax and regulatory-fee inclusive. It is also one of the fastest growing wireless broadband companies since launching in 2002.
In the company’s second quarter results published July 26, it reported to achieving a 6% year-over-year increase in consolidated total revenues to $1.3 billion, and a 77% year-over-year increase in net income to $149 million.
EBITDA reached a company peak of $477 million after a 33% year-over-year increase. The results stemmed from the company’s focus on “generating adjusted EBITDA and cash flow versus subscriber growth as we position for our anticipated launch of 4G LTE For All by the end of the third quarter,” said Roger Lindquist, MetroPCS chairman and CEO. It will launch 4G LTE For All late in the third quarter, which it hopes will return the company to subscriber growth.
MetroPCS bears a P/E of 9.2, P/B of 1.1 and P/S of 0.8.
PCS data by GuruFocus.com
Nexen Inc. (NYSE:NXY)
Paulson bought 6.05 million shares of Nexen Inc. for $23 per share on average, taking a 1.3% weighting in his portfolio. The company’s share price gained 57% year to date, with a marked surge in share price occurring in July.
An announcement that CNOOC Ltd. (CEO) would acquire Nexen accounted for the July jump in share price. In the plan, NCOOC agreed to pay $27.50 per share in cash for Nexen, a 61% premium to its July 20 share price. Both companies’ boards of directors have already given unanimous approval to the transaction, slated to close in the fourth quarter of 2012.
Shire Plc (NASDAQ:SHPG)
Paulson purchased 1,370,800 shares of Shire Plc for $90 per share on average. Its stock price has declined about 6% since June.
Shire develops treatments for people with life-altering health conditions which it markets in 50 countries globally through its three divisions: specialty pharmaceuticals, human genetic therapies and regenerative medicine.
In the third quarter, Shire reported $1.1 billion in total revenues, a 1% year-over-year increase. U.S. GAAP diluted earnings per ADS were $1.19, a 17% year-over-year increase.
“Shire’s business is progressing well. This quarter we grew Non GAAP earnings per ADS by 6% after increasing our investment in R&D by over 20% to fund our increasingly late stage pipeline. We continue to generate strong cash flows (up 20% to over $350 million in the quarter), which will support our future growth,” Angus Russell, Chief Executive Officer, commented in the company’s third quarter earnings release.
Shire expects earnings growth in the double digits for the full-year 2012. It has a P/E of 13.9, close to a 10-year low; P/B of 4.3, close to a three-year low; and P/S of 3.7.
SHPG data by GuruFocus.com
Amerigroup Corp. (AGP)
Paulson bought 1 million shares of Amerigroup for $88 per share on average. The company’s stock price has increased almost 55% year to date, with a spike in July accounting for most of the gain.
Amerigroup’s stock price jumped in July due to an announcement that it would be acquired by WellPoint, who will pay $92 per share in cash for all of its outstanding shares, or $4.9 billion total. Combined, the companies hope to form an industry leader in the government sector serving Medicaid and Medicare patients.
Robbins & Myers Inc. (RBN)
Paulson bought 1 million shares of his fifth-largest new holding, Robbins & Myers, for $52 per share on average. The company’s stock has increased 22.5% year to date primarily due to a spike in August.
The August jump was a market reaction to the company announcing National Oilwell Varco (NYSE:NOV) would acquire it for $60 per share in cash, or $2.5 billion in total. It expects to close the transaction in the fourth quarter of 2012.
See John Paulson’s other buys and sells in his portfolio here. Also check out the undervalued stocks, top growth companies, and high yield stocks of John Paulson.