John Paulson (Trades, Portfolio), portfolio manager of Paulson & Co., disclosed on Tuesday that he established eight new positions during the first quarter: Energen Corp. (EGN, Financial), XL Group Ltd. (XL, Financial), DST Systems Inc. (DST, Financial), Blackhawk Network Holdings Inc. (HAWK, Financial), Goldcorp Inc. (GG, Financial), Validus Holdings Ltd. (VR, Financial), McDermott International Inc. (MDR, Financial) and Lear Corp. (LEA, Financial).
Guru background
Paulson established his firm as a merger arbitrage hedge fund, seeking to make money from situations when one company announces plans to take over one another. The guru established a seven-item checklist that grades a prospective merger based on “risk of merger termination.” Such items include definitive agreement, strategic rationale, no financing condition, no due diligence condition, solidly performing target, reasonable valuation and limited regulatory risk.
Energen
Paulson invested in 755,000 shares of Energen for an average price of $56.10 per share. With this transaction, the guru increased his portfolio 1.04%.
Energen engages in the exploration, development and production of oil, natural gas and liquid gas. The company’s profitability ranks a modest 5 out of 10: although the company has net profit margins that outperform 82% of global competitors, its three-year revenue growth rate of -18% underperforms 60% of global competitors.
XL Group
Paulson invested in 732,000 shares of XL Group for an average price of $43.89 per share. With this transaction, the guru increased his portfolio 0.88%.
XL Group provides property, casualty and specialty products to industrial, commercial and professional institutions. The company’s profitability ranks a modest 4 out of 10: although revenues increased approximately 21.50% per year over the past three years, XL Group’s margins and returns underperform over 90% of global competitors.
DST Systems
Paulson invested in 300,000 shares of DST Systems for an average price of $81.38 per share. With this transaction, the guru increased his portfolio 0.55%.
DST Systems provides information processing and servicing solutions to the financial services industry. The company’s profitability ranks 7 out of 10 primarily due to expanding operating margins and a three-year revenue growth rate that outperforms 86% of global competitors.
Blackhawk
Paulson invested in 550,000 shares of Blackhawk Network Holdings for an average price of $43.62 per share. With this transaction, the guru increased his portfolio 0.54%.
Blackhawk’s three-year revenue growth rate of 14.20% outperforms 64% of global competitors. Despite this, GuruFocus lists four severe warning signs for Blackhawk, including contracting operating margins and a weak Altman Z-score of 1.55.
Goldcorp
Paulson invested in 1 million shares of Goldcorp for an average price of $13.51 per share. With this transaction, the guru increased his portfolio 0.30%.
Goldcorp engages in the operation, exploration, development and acquisition of precious metal properties in North and South America. The company’s profitability ranks 7 out of 10 primarily due to margins and returns that outperform over three-quarters of global competitors.
Validus
Paulson invested in 150,000 shares of Validus for an average price of $62.96 per share. With this transaction, the guru increased his portfolio 0.22%.
Validus is a holding company for reinsurance and insurance-operating companies and investment advisors. The company’s profitability ranks a poor 4 out of 10 as margins and returns underperform over 78% of global competitors. GuruFocus lists several warning signs for Validus, including increasing long-term debt and a dividend yield near a five-year low.
See also
Paulson’s remaining two buys are McDermott International and Lear. These two trades increased the guru’s portfolio 0.12% in the aggregate.
Disclosure: No positions.
