John Paulson (Trades, Portfolio)’s firm Paulson & Co. manages approximately $21.4 billion and focuses specifically on arbitrage strategies, restructurings and other capital events. When his team analyzes stocks undergoing corporate events or sectors in which they have interest, they employ a bottom-up assessment of fundamentals within those targets.
Though Paulson has had some crushing years, he has so far always managed to rebound to superstar status. His event-driven strategy, the Paulson Recovery Fund, won a 2013 Absolute Return Award in 2013 for its 65.1% net gain.
Currently the investor has four portfolio stocks that are trading at lower prices than he purchased them for, according to his GuruFolio (available for download here). The names are: Vanda Pharmaceuticals (VNDA), Caesars Entertainment Corp. (CZR), Vodafone Group Plc (VOD) and Auxilium Pharmaceuticals Inc. (AUXL).
Vanda Pharmaceuticals (VNDA)
John Paulson (Trades, Portfolio) bought 1,392,500 shares of this company as a new holding in the first quarter. His stake is almost 4.9% of the company, and its average price for the quarter was $14 a share. Vanda Pharmaceuticals has since fallen to around $10.10 per share as of afternoon trading on Monday. Shares are down almost 19% in total so far this year.
Vanda Pharmaceuticals is a biopharmaceutical company developing treatments for central nervous system disorders. In conjunction with Novartis (NVS), it has released schizophrenia drug Fanapt. It also has in-licensed Tasimelteon for the treatment of circadian rhythm disorder with BMS and VLY-686, a drug for pruritus, with Eli Lilly (LLY).
In the first quarter, Vanda reported $9.1 million in total revenues, increased from $8.1 million in the first quarter of 2013, with a net loss of $26.5 million, compared to a net loss of $4.5 million for the sale periods. The company held $100.4 million in cash as of March 31, 2014.
The company also announced on Jan. 31, 2014, that it received FDA approval for HETLIOZ 20 mg, capsules for the treatment of Non-24, a circadian rhythm disorder affecting the majority of totally blind individuals.
Vanda’s 10-year revenue and earnings history:
Caesars Entertainment Corp. (CZR)
Paulson owns 13.7 million shares of Ceasars Entertainment Corp at the end of the first quarter, after picking up 1,432,810 additional shares during the quarter, increasing the stake he began in the first quarter of 2012. The company’s first quarter share price averaged $23, significantly above its Monday afternoon price around $18.08 a share. Year to date, Caesars’ shares have slumped almost 16%.
Caesars is a $2.62 billion casino and entertainment company which now does business on three continents.
The company in the first quarter reported a 1.9% drop in net revenue to $2.1 billion, with a 77.6% greater net loss at $386.4 million. The company’s CEO, Gary Loveman, attributed the declines to severe weather and lower visitation in the quarter. Ceasars ended the quarter with $2.48 billion in cash, down from $2.77 reported at year-end.
Ceasars’ 10-year revenue and earnings history:
Caesars has a P/S of 0.3.
Vodafone Group Plc (VOD)
Paulson continued to grow his Vodafone holding for the fourth consecutive quarter since he started it in the first quarter of 2013. He acquired 9,322,509 shares in the first quarter, bringing his entire stake to 28,520,289 shares, a full 1.08% of the massive company. Paulson’s average price for all share purchases represented was $42.15, significantly above its current trading price around $35.01 a share. Year to date shares have declined 11%.
Vodafone Group Plc is a telecommunications company, with a reach in Europe, the Middle East, Africa and Asia Pacific.
For the company’s year ended March 31, Vodafone’s revenue fell 1.9% year over year to £43.6 billion, meeting full-year guidance, as full-year organic service revenue fell 4.3%. Vodafone reported EBITDA of £12.8 billion, reflecting a 5.4% decline. The company has faced significant headwinds in Europe, including competitive, regulatory and macroeconomic factors.
For fiscal 2015, Vodafone has guided for £11.4 billion to £11.9 billion in EBITDA, with positive free cash flow and an intention to increase its dividend.
Vodafone has a P/E of 131.3, P/B ratio of 0.78 which is near a one-year low, and P/S ratio of 1.25 which is near a three-year low.
Auxilium Pharmaceuticals Inc. (AUXL)
Paulson established a stake in Auxilium Pharmaceuticals in the first quarter, buying 4 million shares, or 8.1% of the company. The fourth quarter average price was $27. It has since dropped to $22.12 per share as of Monday. Since the start of the year the company’s share price has lifted almost 7%.
Auxilium primarily focuses on urology, men’s health care and orthopedics. It currently has at least seven brand name products in production, with more in development.
For the first quarter, Auxilium announced a 34% year-over-year increase in total revenue to $88.5 million, due to new products gained through the acquisition of Actient, and the launch of two of its own products, STENDRA and XIAFLEX. It also reported a net loss of $19.4 million, compared to a net loss of $2.3 million in the year-ago quarter.
Auxilium’s 10-year revenue and earnings history:
The company trades with a P/B ratio of 5.3 and P/S ratio of 2.6.