Paulson & Co. starts new positions in 3Q 2013 (Part 3 of 5)
Paulson & Co., founded in 1994 by John Paulson, is an investment management firm specializing in event-driven arbitrage strategies (including merger arbitrage, bankruptcy reorganizations, and distressed credit), structured credit, recapitalization, restructuring, and other corporate events. The firm operates as a partnership consisting of John Paulson and the other partners of the firm.
Paulson & Co. manages approximately $18 billion and employs approximately 120 employees in offices located in New York, London, and Hong Kong.
The firm started new positions in Time Warner Cable (TWC), Sprint Corp (S), Mallinckrodt Plc. (MNK), and FedEx Corp. (FDX) and sold positions in Mead Johnson Nutrition Co. (MJN) and Élan Corp Plc. (ELN).
Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).
Why buy FedEx Corp. (FDX)?
FedEx’s stock has rallied due to positive earnings growth and plans to buy back 32 million shares. This shows management is confident about its strategy and wants to deliver value to shareholders. It said that for FedEx Express, first quarter operating income grew 14%, and operating margin improved 50 basis points year-over-year despite the significant negative impact of net fuel and one fewer operating day. The improvement was driven by stronger U.S. business performance, lower pension expense, and the continued monetization of the company’s aircraft fleet, which helped to drive maintenance costs lower. These were partially offset by higher related depreciation expenses.
FedEx had earlier embarked on cost-cutting efforts to improve its profit margins and counter customer demand for lower-priced shipping services in a slowing economy. The company has a robust financial position with a low debt-to-equity ratio. In its latest earnings announcement, the company reaffirmed its forecast despite tepid global economic growth for fiscal 2014 earnings per share (EPS) growth of 7% to 13% adjusted over fiscal 2013.
The company’s stock price also saw a spike recently, when a number of hedge funds disclosed positions in the transportation company.
According to its website, Paulson & Co. relies on bottom-up fundamental research within corporate events and sectors where it has expertise, and it encourages teamwork by incentivizing collaboration and idea sharing. The flexibility of having long and short event exposure across the capital structure lets it optimize performance across market cycles. In addition to its hedge funds, Paulson & Co. manages real estate private equity funds that focus on various distressed real estate recovery opportunities. Its goals are capital preservation, above-average returns over the long term, and low correlation to the markets.
Browse this series on Market Realist:
- Part 1 - Paulson & Co. starts new positions in TWC, S, MNK, FDX, Sells MJN, ELN – 13F Flash (A)
- Part 2 - Paulson & Co. starts new positions in TWC, S, MNK, FDX, Sells MJN, ELN – 13F Flash (B)
- Part 4 - Paulson & Co. starts new positions in TWC, S, MNK, FDX, Sells MJN, ELN – 13F Flash (D)
- Private Equity & Hedge Funds
- John Paulson