John Paulson on Caesars, AngloGold Ashanti, & CVR Energy: Ira Sohn Presentation

We're posting up notes from the Ira Sohn Conference.  Paulson & Co founder John Paulson gave a presentation on three long ideas: Caesars (CZR), AngloGold Ashanti (AU) and CVR Energy (CVI).  Paulson is featured in the book, The Greatest Trade Ever.

Paulson's Three Long Ideas

Caesars (CZR): Stock with high option value. Was LBO. Common is only 7% of valuation, $1.7B, Opco Debt $16.9B, Net PropCo debt $4.8B. $23B total cap. So equity gets the upside. LBO guys put $6B in, now equity only $1.7B. Says they are turning around.

Stock owners have not only gaming properties, but Social gaming company worth $6-9, Online gaming could be $24 per share. Key is growth. Are seeing RevPAR growth. Added Octavius Tower. Adding Cleveland. 2013 LINQ in Vegas, Cincinnati.

Online gaming upside option. No debt due until 2015. Three years runway. 2007 they did $2.8B EBITDA, LBO at 11x. Guess they get back, adjusted to new facilities, $3.2B Likes hotels because the rates increase with inflation. Online gaming may be another $300M, so total to peak, get to $3.5, with 11x multiple stock is $138, a 10x upside. (that's way too rosy)


AngloGold Ashanti (AU): Pure gold upside. Been getting crushed, much worse than gold price, correlation has broken down. Bears say just buy the ETF. He says, you're paying more by doing that. Says you're getting the company at only $133 per proven reserves.  It's also worth highlighting that Paulson was buying fellow gold miner NovaGold Resources (NG) in April as well.  We've also previously posted a look at Paulson's gold fund.


CVR Energy (CVI): "A gift from Carl Icahn" Merger Arb transaction. Buy stock at $30.35, tender to offer at $30.00, cost of CCP is $0.35. "Contigent Cash Payment" rights. If they sell company for $36.15 CCP could be worth $6.15, with cost of $0.35, that's a 17.6x return.


P.S. - Don't miss other presentations from David Einhorn, Bill Ackman, Larry Robbins & more: notes from Ira Sohn Conference 2012.

John Paulson's Hedge Fund Starts New Positions in MGM Mirage, Apache, Mylan & More: 13F Filing Q1 2010

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund filings.)

Next up is John Paulson's hedge fund Paulson & Co. Before becoming a hedge fund 'rockstar' due to his wildly successful bet against subprime, Paulson managed a seemingly mediocre merger arbitrage fund. So while Paulson has since started other hedge funds focused on other strategies (Recovery Fund, etc), keep in mind that many of the equity positions listed below are related to his core arbitrage strategy. Also, please note that Paulson's massive stake in exchange traded fund GLD is merely a hedge to his fund share class that is denominated in gold.

For more on Paulson's big trade, Wall Street Journal columnist Gregory Zuckerman detailed the impressive wager in the book, The Greatest Trade Ever (one we highly recommend reading). Such amazing performance led Paulson's hedge funds to be the #1 and #4 funds as ranked in Barron's hedge fund rankings in the past.

In recent portfolio activity that has occurred after these filings, John Paulson's fund has disclosed a new stake in American Capital (ACAS) as well. Paulson has been in the spotlight in recent months due to the controversy surrounding Goldman Sachs and the subprime mortgage trade and he cleared the air with his recent letter to investors. Nowadays, Paulson has found his next big bet: a wager against the US dollar. He is executing this via his new gold fund.

The positions listed below were Paulson & Co's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:


Brand New Positions
MGM Mirage (MGM)
Apache (APA)
Mylan (MYL)
Family Dollar Stores (FDO)
Devon Energy (DVN)
Novell (NOVL)
Novagold Resources (NG) ~ we already covered how Paulson was set to buy NG shares
Supermedia (SPMD) ~ we previously detailed this stake as well
DEX One (DEXO)
Smith International (SII)
Boyd Gaming (BYD)
Randgold Resources (GOLD)
Bank of America (Warrants)
Iamgold (IAG)
Beazer Homes (BZH)
Barrick Gold (ABX)
First Midwest Bancorp (FMBI)
Beazer Homes (BZMD)


Increased Positions
Hartford Financial (HIG): Increased position size by 363.6%
Apollo Group (APOL): Increased by 93%
XTO Energy (XTO): Increased by 30%
Bank of America (BAC): Increased by 11%


Reduced Positions
Mead Johnson Nutrition (MJN): Reduced position size by 50%


Positions They Sold Out of Completely
Sun Microsystems ~ inactive, merger completed
Philip Morris International (PM)
Pepsi Bottling Group ~ inactive, merger completed
IMS Health (RX)
Bank of America Preferreds (BAC-S)
Liberty Entertainment (LSTAV)
Burlington Northern Santa Fe ~ inactive, merger complete
Kraft Foods (KFT)
PepsiAmericas ~ inactive, merger complete
Encore Acquisition ~ inactive
Fifth Third Bancorp (FITB)
Chattem ~ inactive
Dr Pepper Snapple (DPS)
Valley National (VLY)
New York Community (NYB)


Top 15 Holdings (by percentage of assets reported on 13F filing)

1. SPDR Gold Trust (GLD): 16.2%

2. Bank of America (BAC): 14.2%

3. Citigroup (C): 9.7%

4. Anglogold Ashanti (AU): 7.8%

5. Comcast (CMCSA) 3.9%

6. Suntrust Banks (STI): 3.8%

7. Boston Scientific (BSX): 3.4%

8. Capital One (COF): 3.3%

9. XTO Energy (XTO): 2.9%

10. Kinross Gold (KGC): 2.7%

11. Wells Fargo (WFC): 2.6%

12. MGM Mirage (MGM): 2.3%

13. Hartford Financial (HIG): 1.7%

14. Apache (APA): 1.6%

15. JPMorgan Chase (JPM): 1.5%


The majority of Paulson's portfolio activity in the first quarter centered around brand new positions or closing positions entirely; there were very few partial adjustments. In terms of new stakes, his position in MGM Mirage is sizable at their 12th largest US equity long. Sticking with the gaming sector, they also started a new position in Boyd Gaming (BYD). We highlight Paulson's new Novell (NOVL) play because this stock seems to currently be 'in play' as hedge fund Elliott Management made a bid for the company at $5.75 (most likely to drum up other bids) and now there are supposedly a bundle of private equity firms interested in NOVL. Lastly, we've been highlighting that numerous hedgies added Family Dollar (FDO) in the first quarter, and Paulson is one of those firms.

Paulson also continues to own a few of the stocks on Goldman Sachs' VIP list such as Bank of America, Pfizer, and JPMorgan. In terms of positions Paulson & Co sold out of, we see that these stocks were mainly in companies that completed merger transactions. This obviously reflects Paulson's core arbitrage strategy. Lastly, the fact that Paulson & Co hold such a large position in SunTrust Banks intrigued us solely because we've seen Warren Buffett sell STI and David Tepper's Appaloosa Management trim their STI stake.

Assets reported on Paulson's 13F filing were $21.1 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn's Greenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Bruce Berkowitz's Fairholme Capital Management, Andreas Halvorsen's Viking Global, and Dan Loeb's Third Point. Be sure to check back daily for new hedge fund updates.

John Paulson Ramps Up Financials Exposure: 13F Filing

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is John Paulson's hedge fund firm Paulson & Co. Before rocketing to hedge fund fame, Paulson managed a seemingly mediocre merger arbitrage fund. All of that quickly changed when he shorted collateralized debt obligations and bought credit default swaps in 2005 for his new trade against subprime. At the end of 2007, the Opportunities fund was up 590% and his Opportunities II fund was up 353%.

Wall Street Journal columnist Gregory Zuckerman detailed the impressive wager in the book, The Greatest Trade Ever, one we highly recommend reading. Such amazing performance led Paulson's hedge funds to be the #1 and #4 funds as ranked in Barron's hedge fund rankings (top 100).

For 2009, Paulson's Advantage fund was up 13.75%, his Advantage Plus up 21%, Credit Opportunities up 34%, and Recovery fund up 24.2%, all as noted in our hedge fund performance numbers post. Nowadays, Paulson has found his next big bet: a wager against the US dollar which he is executing via his new gold fund. Next we'll examine their holdings to see what other wagers they are making.

Below are Paulson & Co's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Brand New Positions
Apollo Group (APOL)
Bank of America (BAC-S preferred)
Burlington Northern Santa Fe (BNI) ~ this was a merger arb play and is obviously no longer in the portfolio
CIT Group (CIT) ~ most likely a result of a debt to equity conversion
Chattem (CHTT)
Comcast (CMCSA)
Capital One (Warrants expiring 11/14/2018)
DirecTV (DTV) ~ as a result of the Liberty Media transaction
Encore Acquisition (EAC)
Hyatt Hotels (H)
IMS Health (RX)
JP Morgan Chase (Warrants)
Kraft (KFT)
Lear Corp (LEA)
Liberty Media (LSTZA) ~ again, part of the Liberty Media transaction
Macerich (MAC)
Mead Johnson (MJN)
New York Community Trust (NYB)
Northern Trust (NTRS)
Pfizer (PFE)
Sprint Nextel (S)
3 Com (COMS)
Vail Resorts (MTN)
Valley National Bancorp (VLY)
Wells Fargo (WFC)
XTO Energy (XTO)


Increased Positions
Suntrust Bank (STI): Increased by 1925.4% (not a typo, their previous position was small)
Conseco (CNO): Increased by 579.3%
Ashford Hospitality Trust (AHT): Increased by 283.4%
JPMorgan Chase (JPM): Increased by 250%
Felcor Lodging (FCH): Increased by 247.8%
Marshall & Ilsley (MI): Increased by 117.1%
Citigroup (C): Increased by 68.9%
Sunstone Hotels (SHO): Increased by 25.8%
Pepsi Bottling Group (PBG): Increased by 4%
Gold Fields (GFI): Increased by 2.4%
Starwood Hotels (HOT): Increased by 1.54%
First Horizon National (FHN): Increased by 1.5%


Reduced Positions
Regions Financial (RF): Reduced by 44.7%
Bank of America (BAC): Reduced by 5.5%


Removed Positions (Sold out completely):
CF Industries (CF)
Cemex (CX)
Liberty Media (LMDIA) ~ part of the transaction
Old National Bancorp (ONB)
People's United Financial (PBCT)
Ultrashort Financial (SKF)
Schering Plough (SGP) ~ merger transaction complete
Varian (VARI)
Wyeth (WYE) ~ merger transaction complete


Top 15 Holdings by percentage of assets reported on 13F filing

1. SPDR Gold Trust (GLD): 17.07%
   
2. Bank of America (BAC): 11.49%
   
3. Anglogold Ashanti (AU): 8.70%
   
4. Citigroup (C): 8.47%
   
5. Boston Scientific (BSX): 4.51%
   
6. Comcast (CMCSA): 3.75%
   
7. Sun Microsystems (JAVA): 3.50%
   
8. Capital One (COF): 3.30%
   
9. Suntrust (STI): 3.11%
   
10. Kinross Gold (KGC): 2.95%
    
11. Wells Fargo (WFC): 2.39%
    
12. XTO Energy (XTO): 2.35%
    
13. Philip Morris International (PM): 2.19%
    
14. Pepsi Bottling Group (PBG): 1.97%
    
15. IMS Health (IMS): 1.91%
    

First and foremost we want to address a lot of misinformation that has been floating around regarding Paulson & Co's stake in exchange traded fund GLD. This position is a HEDGE for them. Most hedge funds have share classes denominated in US dollars. While Paulson has this as well, they also have a hedge fund share class denominated in gold. As such, they've stated in the past that their position in GLD is a hedge for this share class.

Many people out there misinterpret this as outright bullishness on gold. After all, it is a truly massive position in GLD that shows up on filings. Paulson is expecting massive inflation and is focused on a bet against the US dollar. He's expressed this bet via his brand new gold fund that invests primarily in the equity of gold mining companies and then also some derivatives on the price of gold. Hopefully this clarifies things and if not, make sure to check out our in-depth examination of Paulson's gold fund.

Turning to Paulson & Co's latest 13F filing, we must remind everyone that a lot of these positions are a result of Paulson's merger arbitrage strategy. Before Paulson became famous with his bet against subprime that netted him billions, he was (and still is) focused on merger-arb. So, keep in mind that a large number of his long positions disclosed here are most likely hedged with paired short positions either in other companies or possibly even against the box.

Paulson & Co took new positions in financials via warrants of JPMorgan Chase and Capital One, as well as preferred unit shares of Bank of America and common stock in SunTrust, Citigroup, and JPMorgan. Some of Paulson's "new positions" are deceiving because they didn't actually buy shares, but instead received equity as a result of various corporate transactions. This explains their 'new' stakes in CIT Group, DirecTV, and Liberty Media. Also, since Warren Buffett's Berkshire Hathaway has purchased Burlington Northern, Paulson & Co obviously no longer hold that position.

However, Paulson's largest new addition was in Comcast (CMCSA) as they brought it up all the way to their sixth largest US equity holding. We also note that Paulson & Co still maintains a large Boston Scientific position and we highlight this because David Einhorn's Greenlight Capital recently assembled a huge BSX position as well. In the past, many investors have voiced concerns about this not being a good investment. But then again, those people aren't Einhorn or Paulson. Lastly, more recent filings indicate that Paulson has added to positions and we've detailed those transactions as well.

Paulson 'sold' his stakes in Wyeth, Schering Plough, and Liberty Media as a result of mergers and other corporate transactions. One notable sale Paulson did make though was relinquishing almost half of his Regions Financial position. To learn more about Paulson and his success, we highly recommend reading The Greatest Trade Ever.

Assets from the collective holdings reported to the SEC via 13F filing were $19.79 billion this quarter compared to $17.1 billion last quarter, so a noticeable increase of well over $2 billion. Remember that these filings are not representative of the hedge fund's entire base of assets under management.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, and Warren Buffett's portfolio. Check back daily for our new updates.

Hedge Fund Paulson & Co's Latest Portfolio: 13F Filing

This is the third quarter 2009 edition of our hedge fund portfolio tracking series. If you're unfamiliar with tracking hedge fund movements or SEC filings, check out our series preface on hedge fund 13F filings.

Next up in our series is current hedge fund icon John Paulson. If you are unfamiliar with Paulson & Co, then here's what you need to know. Before the trade that made him famous in the investment world, John Paulson was a seemingly mediocre merger arbitrage fund manager. All of that changed when Paulson began shorting collateralized debt obligations and buying credit default swaps back in 2005 as he had conviction in his bet against subprime. His Credit Opportunities fund launched in 2006 with $150 million aimed to short subprime mortgage backed securities. This fund enjoyed immediate success, causing him to launch the Credit Opportunities II fund. At the end of 2007, the Opportunities fund was up 590% and his Opportunities II fund was up 353%. Such sterling performance led Paulson's hedge funds to be the #1 and #4 funds as ranked in Barron's hedge fund rankings (top 100). Paulson's funds earned this distinction due to their solid 3 year annualized performance metrics. Additionally, Paulson sits at #3 on Alpha's hedge fund rankings list for 2009, which is compiled based on assets under management (AUM).

After massive returns on that trade he become a hedge fund and investor icon. His latest wager involves starting a brand new gold fund which we examined in-depth earlier in the week as he has turned his sights to now betting against the US dollar. In terms of notable portfolio activity in addition to what you'll find below, we saw that Paulson & Co has a large Cadbury stake (CBY) as they believe they will receive a higher takeover bid. Additionally, they've filed a 13D with the SEC in regards to their new stake in Conseco (CNO). You can see more of Paulson's insight and commentary on their portfolio in their Q3 investor letter.

Keep in mind that the positions listed below were their long equity, note, and options holdings as of September 30th, 2009 as filed with the SEC. We don't cover every single portfolio maneuver, as we instead focus on all the big moves. All holdings are common stock unless otherwise denoted.


Some New Positions (Brand new positions that they initiated last quarter):
Citigroup (C)
Varian (VARI)
Cemex (CX)
Starwood Hotels (HOT)
Hartford Financial Services (HIG)
Sunstone Hotel (SHO)
Starwood Property Trust (STWD)
Conseco (CNO)
Old National Bancorp (ONB)
Felcor Lodging Trust (FCH)
Ashford HOspitality Trust (AHT)


Some Increased Positions (Positions they already owned but added shares to)
First Horizon National (FHN): Increased position by 137%
Liberty Media (LMDIA): Increased by 123.8%
Pepsi Bottling Group (PBG): Increased by 19.4%
PepsiAmericas (PAS): Increased by 2.7%


Some Reduced Positions (Some positions they sold shares in)
JPMorgan Chase (JPM): Reduced position by 71.4%
Bank of America (BAC): Reduced by 4.9%


Removed Positions (Positions they sold out of completely)
Petro Canada (PCZ)
Goldman Sachs (GS)
Market Vectors Gold Miners (GDX)
Humana (HUM)
Embarq (EQ)
AT&T (T)
Data Domain (DDUP)
Centennial Comm (CYCL)
State Street (STT)
Centex (CTX)
Kimco Realty (KIM)


Top 15 Holdings by percentage of assets reported on 13F filing

1. Gold Trust (GLD): 15.22%
2. Bank of America (BAC): 13.21%
3. Wyeth (inactive): 12.27%
4. AngloGold Ashanti (AU): 8.54%
5. Schering Plough (inactive): 7.95%
6. Citigroup (C): 7.1%
7. Liberty Media (LMDIA): 6.8%
8. Boston Scientific (BSX): 5.13%
9. Sun Microsystems (JAVA): 3.29%
10. Kinross Gold (KGC): 3.26%
11. Capital One (COF): 2.97%
12. Philip Morris International (PM): 2.14%
13. Pepsi Bottling Group (PBG): 1.78%
14. Gold Fields (GFI): 1.55%
15. Mirant (MIR): 1.46%
    

The last time we looked at Paulson & Co's long equity portfolio, they were buying financials. This time around, they were selling a few of them as they sold some JPMorgan Chase (JPM), slightly trimmed their Bank of America (BAC) stake, and sold completely out of Goldman Sachs (GS). One financial they did add as a new position was Citigroup (C). We actually covered Paulson's rumored purchase of C earlier and so Market Folly readers knew about this back in August. Additionally, they added to their First Horizon (FHN) stake.

Hedge fund Paulson & Co's largest holding continues to be gold via GLD. Don't read too much into that because that entire position is purely a hedge for their fund share class denominated in gold. Paulson's inflationary outlook is reflected in his new gold fund, but we want to make sure everyone realizes that his GLD position is purely a hedge for a his gold share class in his other hedge fund. He is betting on inflation with his new fund via gold related equity stakes and derivatives on the price of gold.

Some other notable changes in his portfolio include new positions in Starwood Hotels and the August IPO of Starwood Property Trust. John Paulson's entrance into those as well as Ashford Hospitality Trust and Felcor Lodging Trust is interesting, although we must point out that they make up a very small portion of his portfolio. He also started a stake in Conseco (CNO) but we had already detailed this on the blog. Paulson & Co's background in merger arbitrage is evident in their positions of Wyeth and Schering Plough as those were both taken out in mergers/buyouts and are no longer actively traded.

We've assembled quite a few resources on hedge fund Paulson & Co so make sure to check out their:

- Q3 investor letter
- An in-depth look at Paulson's new gold fund
- Their recent 13D filing on Conseco (CNO)
- Paulson's stake in Cadbury (CBY)
- 2008 annual letter
- The Greatest Trade Ever by Gregory Zuckerman (WSJ Columnist): a detailed account of Paulson's winning bet against subprime that made him billions. See our review here.

Assets from the collective holdings reported to the SEC via 13F filing were $20.4 billion this quarter compared to $17.4 billion last quarter, so an increase of $3 billion. Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. Realistically, the position percentages are more watered down in their actual hedge fund portfolio.

This is just one of the 40+ prominent funds that we'll be covering in our Q3 2009 hedge fund portfolio series. We've already covered Seth Klarman's Baupost Group Bill Ackman's Pershing Square, Stephen Mandel's Lone Pine Capital, Dan Loeb's Third Point LLC, and David Einhorn's Greenlight Capital so check back daily as we'll be posting up a new hedge fund each morning.