As 13F filings rolled in this week, the most notable revelation of John Paulson (Trades, Portfolio)’s was his reduction of his SPDR Gold Trust (GLD, Financial) stake, a mainstay of his portfolio for years, at a significant loss. Paulson, the head of hedge fund Paulson & Co., in his next most prominent move increased his holding of health care stocks for the seventh consecutive quarter. The sector made up more than 57% of his long portfolio, compared to 48.3% the previous quarter.
The expansion in the sector may relate to Paulson’s opening of a new long-short fund focused on health care, pharmaceuticals and related companies, which he announced in a letter, CNBC reported in June. Paulson named his health care expert Guy Levy as its portfolio manager. He already had large interest in the sector prior to the announcement, with five of his top stocks related to health care in the quarter ended March 31, 2015.
Paulson’s firm employs bottom-up fundamental analysis, according to his website, within event-driven situations and sectors. He often makes outsized bets and has a record of lumpy returns, including making $15 billion in 2007 betting against the subprime mortgage market and posting a 36% loss in his Paulson Advantage Plus Fund for 2014.
Overall the price of health care stocks has declined in the past year, with the S&P 500 Health Care Index down 7.4%, less than the 8.1% fall of the S&P 500.
In the fourth quarter, Paulson appeared to give up on health care providers and planners, eliminating his only two stocks in the area, HCA Holdings Inc. (HCA, Financial) and Aetna Inc. (AET, Financial). He sold shares of only two existing positions, Perrigo Co. PLC (PRGO, Financial) and Allergan PLC (AGN, Financial), both drug manufacturers.
The remainder of the health care holdings Paulson either increased or initiated during the quarter, except for four that he left unchanged.
Five of Paulson & Co.’s seven largest new long equity holdings were also health care stocks: Akorn Inc. (AKRX, Financial), Pfizer Inc. (PFE, Financial), Biogen Inc. (BIIB, Financial), AbbVie Inc. (ABBV, Financial) and Diplomat Pharmacy Inc. (DPLO, Financial).
Paulson & Co. bought 2,879,138 shares of Akorn Inc., a 0.66% portfolio weight. The stock’s price averaged $31 for the quarter.
Akorn Inc. is a Louisiana corporation founded in 1971 in Abita Springs, Louisiana. Akorn Inc. has a market cap of $2.95 billion; its shares were traded at around $25.80 with and P/S ratio of 5.35.
Paulson bought 632,700 shares of Pfizer Inc., a 0.13% portfolio weight. The stock’s price averaged $33 per share for the quarter.
Pfizer Inc. was incorporated under the laws of the State of Delaware on June 2, 1942. Pfizer Inc. has a market cap of $182.91 billion; its shares were traded at around $29.63 with a P/E ratio of 22.3 and P/S ratio of 3.88. The dividend yield of Pfizer Inc stocks is 3.85%. Pfizer Inc. had an annual average earnings growth of 2.3% over the past 10 years.
Paulson purchased 36,200 shares of Biogen Inc., a 0.07% portfolio weight. The stock’s price averaged $288 for the quarter.
Biogen Idec Inc. was formed as a California corporation in 1985 and became a Delaware corporation in 1985. Biogen Inc. has a market cap of $58.09 billion; its shares were traded at around $265.63 with a P/E ratio of 17.43 and P/S ratio of 5.7. Biogen Inc. had an annual average earnings growth of 26.5% over the past 10 years. GuruFocus rated Biogen Inc. the business predictability rank of 5-star.
Paulson purchased 139,700 shares of AbbVie Inc., a 0.05% portfolio weight. The stock’s price averaged $58 for the quarter.
AbbVie Inc. was incorporated in Delaware on April 10, 2012, and is a wholly owned subsidiary of Abbott. Abbvie Inc. has a market cap of $89.93 billion; its shares were traded at around $55.01 with a P/E ratio of 31.71 and P/S ratio of 4.11. The dividend yield of AbbVie Inc. stocks is 3.79%.
Diplomat Pharmacy Inc. (DPLO, Financial)
Paulson purchased 210,000 shares of Diplomat Pharmacy Inc., a 0.04% portfolio weight. The stock’s share price averaged $31 for the quarter.
Diplomat Pharmacy Inc. was founded in 1975. The company is a specialty pharmacy company engaged in improving the lives of patients with complex chronic diseases. Diplomat Pharmacy Inc. has a market cap of $2.07 billion; its shares were traded at around $32.18 with a P/E ratio of 68.98 and P/S ratio of 0.41.
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