John Paulson (Trades, Portfolio), head of investment firm Paulson & Co., disclosed his second-quarter portfolio earlier this month.
With the long-term goal of capital preservation, above-average returns and low correlation to the market, the guru's New York-based firm specializes in event-driven arbitrage strategies, including merger arbitrage, bankruptcy reorganizations and distressed credit.
Sticking to these criteria, the investor revealed he established four new positions during the quarter, exited seven stocks and added to or reduced a number of other holdings. Notable transactions included the addition of TD Ameritrade Holding Corp. (AMTD, Financial) to the portfolio, as well as significant reductions to the Anglogold Ashanti Ltd. (AU, Financial) and ViacomCBS Inc. (VIAC, Financial) stakes and a boost to the Bausch Health Companies Inc. (BHC, Financial) position.
It should be noted that the Allergan holding was dissolved in conjunction with the company's voluntary delisting associated with its merger with AbbVie Inc. (ABBV, Financial). Similarly, the Sprint Corp. position was closed following its acquisition by T-Mobile US Inc. (TMUS, Financial) earlier this year.
TD Ameritrade
Paulson invested in 975,000 shares of TD Ameritrade, allocating 1.13% of the equity portfolio to the holding. The stock traded for an average price of $37.55 per share.
The Omaha, Nebraska-based financial services company, which operates an electronic trading platform, has a $20.78 billion market cap; its shares were trading around $38.54 on Tuesday with a price-earnings ratio of 10.76, a price-book ratio of 2.17 and a price-sales ratio of 3.61.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued. The GuruFocus valuation rank of 9 out of 10 supports this assessment.
GuruFocus rated TD Ameritrade's financial strength 4 out of 10. While the company has comfortable interest coverage, the weighted average cost of capital exceeds the return on invested capital, signifying that it does not make a profit on its investments.
The company's profitability scored a 5 out of 10 rating on the back of margins and returns that outperform a majority of competitors. TD Ameritrade also has a moderate Piotroski F-Score of 5, which implies operations are stable, and a predictability rank of one out of five stars. GuruFocus says companies with this rank typically return an average of 1.1% annually over a 10-year period.
Of the gurus invested in TD Ameritrade, Jim Simons (Trades, Portfolio)' Renaissance Technologies has the largest stake with 0.56% of outstanding shares. Other top shareholders include Paul Tudor Jones (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), George Soros (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).
Anglogold Ashanti
With an impact of -2.78% on the equity portfolio, the guru trimmed his Anglogold Ashanti stake by 38.55%, selling 4.37 million shares. During the quarter, shares traded for an average price of $24.56 each.
He now holds 6.97 million shares, which represent 6.57% of the equity portfolio. GuruFocus estimates Paulson has lost 53.05% on the investment since establishing it in the first quarter of 2009.
The South African mining company has a market cap of $11.64 billion; its shares were trading around $27.95 on Tuesday with a price-earnings ratio of 37.62, a price-book ratio of 3.91 and a price-sales ratio of 3.27.
According to the Peter Lynch chart and GuruFocus valuation rank of 2 out of 10, the stock is overvalued.
Anglogold Ashanti's financial strength and profitability were both rated 5 out of 10 by GuruFocus. While the company has sufficient interest coverage, the Altman Z-Score of 2.05 indicates it is under some pressure since revenue per share has declined over the past five years. The WACC also surpasses the ROIC, suggesting weak profitability.
In addition to an expanding operating margin, the miner is also being supported by strong returns that outperform a majority of industry peers, a moderate Piotroski F-Score of 5 and a one-star predictability rank.
With a 1.68% stake, Paulson is the company's largest guru shareholder. Simons' firm, Howard Marks (Trades, Portfolio), Pioneer, First Eagle Investment (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), John Hussman (Trades, Portfolio) and Gabelli also own the stock.
ViacomCBS
Impacting the equity portfolio by -2.37%, the investor curbed his stake in ViacomCBS by 73.83%, selling 4.43 million shares. The stock traded for an average per-share price of $19.16 during the quarter.
GuruFocus data shows Paulson's 1.57 million-share investment, which accounts for _ of the equity portfolio, has lost 23.74% in value since the fourth quarter of 2019.
The mass media company, which is headquartered in New York, has a $17.08 billion market cap; its shares were trading around $27.34 on Tuesday with a price-earnings ratio of 6.84, a price-book ratio of 1.23 and a price-sales ratio of 0.49.
Based on the Peter Lynch chart, the stock appears to be undervalued. The GuruFocus valuation rank also supports this assessment.
GuruFocus rated ViacomCBS's financial strength 4 out of 10. In addition to having inadequate interest coverage, the Altman Z-Score of 1.57 warns the company could be in danger of going bankrupt. The ROIC exceeds the WACC, however, indicating good returns on its investments.
The company's profitability fared much better, scoring an 8 out of 10 rating. Although the operating margin is in decline, it is still outperforming versus competitors, as are the company's returns. ViacomCBS also has a low Piotroski F-Score of 3, which suggests business conditions are in poor shape, and the 3.5-star predictability rank is on watch as a result of a decline in revenue per share over the past 12 months. According to GuruFocus, companies with this rank typically return an average of 9.3% per year.
Seth Klarman (Trades, Portfolio) is the company's largest guru shareholder with a 3.06% stake. Other gurus with large positions are John Rogers (Trades, Portfolio), Larry Robbins (Trades, Portfolio), Hotchkis & Wiley, Pioneer, Sarah Ketterer (Trades, Portfolio) and Gabelli.
Bausch Health Companies
Paulson boosted his stake in Bausch Health Companies by 23.99%, picking up 5 million shares. The trade had an impact of 2.92% on the equity portfolio. The stock traded for an average price of $17.60 per share during the quarter.
The guru now owns a total of 25.8 million shares, which hold 15.10% space in the equity portfolio. GuruFocus data shows Paulson has lost an estimated 64.33% on the investment so far.
The Canadian pharmaceutical company formerly known as Valeant has a market cap of $5.95 billion; its shares were trading around $16.82 on Tuesday with a price-book ratio of 12.38 and a price-sales ratio of 0.72.
The chart shows the stock is trading below its median price-sales value but above its median price-book ratio. The GuruFocus valuation rank of 10 out of 10 indicates the stock is undervalued.
Weighed down by debt and weak interest coverage, Bausch's financial strength was rated 2 out of 10 by GuruFocus. The Altman Z-Score of -0.02 warns the company could be in danger of bankruptcy. The WACC also surpasses the ROIC, indicating poor profitability on its investments.
The company's profitability did not fare much better, scoring a 4 out of 10 rating on the back of a declining operating margin, negative returns that underperform a majority of industry peers and a low Piotroski F-Score of 3. As a result of declining revenue per share over the past five years, the one-star predictability rank is on watch.
Of the gurus invested in Bausch Health, Paulson has the largest stake with 7.28% of outstanding shares. Other top guru shareholders include Robbins, ValueAct Holdings LP (Trades, Portfolio), Simons' firm, Francis Chou (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Robert Bruce (Trades, Portfolio).
Additional trades and portfolio composition
Other new positions Paulson entered during the quarter were Equinox Gold Corp. (EQX, Financial), Qiagen NV (QGEN, Financial) and Taubman Centers Inc. (TCO, Financial).
The guru's $3.13 billion equity portfolio, which is composed of 30 stocks, is most heavily invested in the health care sector with a weight of 43.81%.
Disclosure: No positions.
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