John Paulson Loves Pianos, Hates Financials

by Alyssa Oursler | August 15, 2013 4:30 pm

This week, we’ve learned quite a bit about hedge fund manager John Paulson.

For one, we learned he loves pianos. That’s why Paulson & Co. bought venerable artisan piano-maker Steinway (LVB[1]) earlier this week[2] — marking the hedge fund’s first outright buyout[3].

We’ve also learned what stock stakes Paulson has thrown his money at. “Smart money” names from Warren Buffett[4] to Bill Ackman[5] all filed their 13Fs this week, and Paulson was no exception.

Let’s take a quick look at his investment activity in the most recent quarter:

Company Ticker Shares ADded
Cooper Tire & Rubber  CTB  5,000,000
Elan  ELN  5,100,000
Smithfield Foods  SFD  5,000,000
T-Mobile US  TMUS  16,674,449
William Lyons Homes  WLH  3,322,666

William Lyons Homes (WLH[6]), for one, has struggled this year as housing’s red-hot first-half run inevitably cooled off in recent months. Still, as InvestorPlace IPO expert Tom Taulli recently noted, the company’s fundamentals are strong[7].

The stake in Cooper Tire & Rubber (CTB[8]) is especially interesting. As long as Paulson bought his 5 million shares before June 11 (remember, the quarter for this filing ended June 30), he made out like a bandit. CTB jumped around 41% that day after news broke that Apollo Tyres was buying out the company. The deal is under investigation right now, but that doesn’t affect the gains Paulson has likely already pocketed.

A similar story can be told for Smithfield Foods (SFD[9]), which soared in late May after being acquired by Chinese company Shuanghui. Meanwhile, Paulson let go of food producer H.J. Heinz (HNZ[10]), likely taking his profits after the company jumped on the Berkshire Hathaway (BRK.B[11]) acquisition.

Here are other companies he exited last period:

Company Ticker Shares Dropped
Barrick Gold  ABX  360,000
Heinz  HNZ  1,000,000
Kinder Morgan  KMP  2,511,670
Scripps Networks  SNI  2,100,000
Wells Fargo  WFC  3,491,000

Then, there was a pile of names he merely reduced his stake in. His new T-Mobile US (TMUS[12]) holdings, for instance, came along at the same time he sold just about all of his Sprint Nextel (S[13]) shares.

Meanwhile, on top of dropping WFC, several financials were pared back dramatically, including Hartford Financial Services (HIG[14]) and all common shares of Capitol One (COF[15]) — although he held onto some W shares.

Company Ticker % DEcrease
Sprint Nextel  S -13.4%
Hartford Financial Services HIG -45.5%
Ryman Hospitality Properties RHP -47.9%
SPDR Gold Shares GLD -53.1%
FairPoint Communications FRP -85.4%
Capitol One Financial COF -100%*
* Common shares

Finally, Paulson also upped a few positions. The biggest one: His firm dramatically increased its holding of Cobalt International Energy (CIE[16]).

On top of that, it also more than doubled the number of shares it owned of small-cap biopharma name Shire (SHPG[17]). Since the end of June — when this 13F was filed — the stock has already gained nearly 17%, which is more than four times the broader market.

Plus, Freeport-McMoRan Copper & Gold (FCX[18]) has made a similar run in that time period, while Family Dollar (FDO[19]) and Cablevision (CVC[20]) are also handily beating the market of late.

Company Ticker % INcrease
Cobalt International Energy CIE +1,743%
Shire SHPG +107%
Freeport-McMoRan Copper & Gold FCX +72%
Family Dollar Stores FDO +49%
Cablevision CVC +26%

All in all, Paulson seems to be making the right moves lately.

And yes, buying a piano-maker because you love pianos counts as one of them.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

  1. LVB:
  2. earlier this week:
  3. first outright buyout:
  4. Warren Buffett:
  5. Bill Ackman:
  6. WLH:
  7. the company’s fundamentals are strong:
  8. CTB:
  9. SFD:
  10. HNZ:
  11. BRK.B:
  12. TMUS:
  13. S:
  14. HIG:
  15. COF:
  16. CIE:
  17. SHPG:
  18. FCX:
  19. FDO:
  20. CVC:

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