(GuruFocus, December 15, 2009) These days, John Paulson has become an icon in investing management community. Whatever he buys is bound to go up and whatever he sells tends to go down, making his investments self-fulfilling prophesies. In 2007 and 2008, the biggest story about him was his successful trade in buying CDS’s on residential mortgages, essentially shorting these securities. Too bad one can short these toxic assets only once. Even if they could reach close to zero, John Paulson has to make money elsewhere. This year, one of the big stories about John Paulson is on he turned the switch and go long on financials, starting with holding Bank of America (BAC) in the first quarter and then recently with a Citigroup Inc. stake. Another big story, of course, is his entering a large Gold position long before the inflation is in sight.
Another investment strategy Paulson continues to rely on to make money for his ever expanding investor base is to go back where he came from – risk arbitrage.
Earlier this year, he successfully played his hand in the Pfizer/Wyeth merger and Merck and ScheringPloug Corp. merger. Both deals were closed early this quarter.
One of the open deal John Paulson has a position in is Oracle Corp. (ORCL, Financial) buying out Sun Microsystems, Inc. (JAVA, Financial).
On March 18, WSJ reported that IBM was in discussion to buy Sun for $6.5 billion. Sun stock jumped from less than $5 dollars to close to $9 per share. The speculation died off and the Sun stocks started to gyrate toward pre-rumor level of $4-5 per share.
Then on April 20,2009, to everyone’s surprise Oracle announced it is buying Sun Microsystems for $9.50 per share in cash. Stock price of Sun jumped from a little over $6 per share to over $9 per share.
The merger was stalked by EU regulators since August on anti-competition concerns. Until Monday, December 14, 2009, investors did not know when the deal will close or whether it will close at all. In the meantime, Sun stock price dropped below $9.00 per share. On Monday, EU was reported to be warm to the idea of merger provided Oracle commit a number of items of keeping up the competition.
Depending of the entry point, John Paulson’s play in the Oracle/Sun deal may or may not yield spectacular return. The deal dragged on for too long and the opportunity cost may deem the trade a lag in Paulson’s overall performance.
According to GuruFocus data, John Paulson initiated a 74 million share position in JAVA during the quarter ended on June 30, 2009. We do not know exactly when he started to buy JAVA. If he bought before the ORCL/SUN announcement, then he is in for some decent profit; if he bought his shares after the announcement, then the trade is a mediocre one.
JAVA closed on April 20 at $9.15 and closed on today (December 15 2009) at $9.32 per share. Even if the deal close in the near future, the buying out price is $9.50 per share. John Paulson has waited for about eight months for the few percentages of return.
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Another investment strategy Paulson continues to rely on to make money for his ever expanding investor base is to go back where he came from – risk arbitrage.
Earlier this year, he successfully played his hand in the Pfizer/Wyeth merger and Merck and ScheringPloug Corp. merger. Both deals were closed early this quarter.
One of the open deal John Paulson has a position in is Oracle Corp. (ORCL, Financial) buying out Sun Microsystems, Inc. (JAVA, Financial).
On March 18, WSJ reported that IBM was in discussion to buy Sun for $6.5 billion. Sun stock jumped from less than $5 dollars to close to $9 per share. The speculation died off and the Sun stocks started to gyrate toward pre-rumor level of $4-5 per share.
Then on April 20,2009, to everyone’s surprise Oracle announced it is buying Sun Microsystems for $9.50 per share in cash. Stock price of Sun jumped from a little over $6 per share to over $9 per share.
The merger was stalked by EU regulators since August on anti-competition concerns. Until Monday, December 14, 2009, investors did not know when the deal will close or whether it will close at all. In the meantime, Sun stock price dropped below $9.00 per share. On Monday, EU was reported to be warm to the idea of merger provided Oracle commit a number of items of keeping up the competition.
Depending of the entry point, John Paulson’s play in the Oracle/Sun deal may or may not yield spectacular return. The deal dragged on for too long and the opportunity cost may deem the trade a lag in Paulson’s overall performance.
According to GuruFocus data, John Paulson initiated a 74 million share position in JAVA during the quarter ended on June 30, 2009. We do not know exactly when he started to buy JAVA. If he bought before the ORCL/SUN announcement, then he is in for some decent profit; if he bought his shares after the announcement, then the trade is a mediocre one.
JAVA closed on April 20 at $9.15 and closed on today (December 15 2009) at $9.32 per share. Even if the deal close in the near future, the buying out price is $9.50 per share. John Paulson has waited for about eight months for the few percentages of return.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and John Paulson for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
Also check out:
