U.S. markets closed

John Paulson Gains ViacomCBS, Buys 5 Stocks in the 4th Quarter

John Paulson (Trades, Portfolio), president and manager of Paulson & Co., disclosed this month that his firm gained a holding in ViacomCBS Inc. (NASDAQ:VIAC) following a merger and established five new positions during the fourth quarter: Pretium Resources Inc. (NYSE:PVG), Tech Data Corp. (NASDAQ:TECD), Tiffany & Co. (NYSE:TIF), LogMeIn Inc. (NASDAQ:LOGM) and Innophos Holdings Inc. (NASDAQ:IPHS).


A former mergers and acquisitions banker, Paulson established his New York-based firm as a merger arbitrage hedge fund, seeking to make money from situations when one public company announces plans to take over a second company. The fund manager detailed a seven-criterion checklist for a strong merger, as Table 1 illustrates.

Definitive merger agreement between the two companies

Strategic rationale behind the merger

No financing conditions

No due diligence conditions

Solidly-performing target

Reasonable valuation

Limited regulatory risk



Table 1

As of quarter-end, Paulson's $4.63-billion equity portfolio contains 37 holdings with a turnover ratio of 8%. The top three sectors in terms of weight are health care, communication services and basic materials.

7dddc77908b9e6702f610fbb00b6a2f8.png

ViacomCBS

Paulson gained 6 million Class B shares of ViacomCBS as a result of a merger between CBS and Viacom Inc. (NASDAQ:VIAB). Shares of ViacomCBS averaged $38.79 during the quarter; the position represents 5.44% of the equity portfolio.

a67f27fdbd11c2148e97a48fc8adbb38.png

CBS and Viacom completed their merger on Dec. 4, 2019, combining into a premium content company that operates brands like CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV and Comedy Central. The New York-based company reported last week that revenues for 2019 increased 2% year over year, driven by growth in advertising, affiliate and content licensing revenues.

4153322081ca860296980741db9efaed.png

GuruFocus ranks the company's profitability 9 out of 10 on several positive investing signs, which include net profit margins and returns outperforming over 86% of global competitors despite operating margins contracting over the past five years.

0555e89d5a2cf0db96e3da535afde5d2.png

Pretium Resources

Paulson purchased 2,588,600 shares of Pretium Resources, giving the stake 0.62% weight in the equity portfolio. Shares averaged $10.61 during the quarter.

7005757ca5be81dbc8b04f33a059eda2.png

The Vancouver, British Columbia-based company acquires and explores precious metal resources in the Americas. GuruFocus ranks Pretium's financial strength 5 out of 10: Although the company has a solid Piotroski F-score of 6, its interest coverage and cash-to-debt ratios are underperforming over 85% of global competitors.

1c781ae939dc55bad22279bad72f7856.png

Tech Data

Paulson purchased 133,426 shares of Tech Data, giving the position 0.41% weight in the equity portfolio. Shares averaged $129.24 during the quarter.

ded0c033a6e0f9f6462436cb829a8401.png

The Clearwater, Florida-based company brings products from technology vendors to market and provides retailers with logistics services. On Nov. 27, 2019, Tech Data entered into a definitive merger agreement in which an affiliate of Apollo Global Management (NYSE:APO) will acquire all outstanding shares of Tech Data for $145 per share in cash, $15 higher than the previous offer of $130 per share. Meanwhile, Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) offered a merger at $140 per share in cash yet backed out following Apollo's superior offer.

GuruFocus ranks Tech Data's profitability 9 out of 10 on several positive investing signs, which include expanding operating margins, a four-star business predictability rank, a high Piotroski F-score of 8 and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 80.88% of global competitors.

dbad530dcbfdc98b928fbd7fb0c91708.png

Other gurus with holdings in Tech Data include Jeremy Grantham (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio).

Tiffany

Paulson purchased 134,030 shares of Tiffany, giving the holding 0.39% weight in the equity portfolio. Shares averaged $119.09 during the quarter.

a960559deff2be8bf36edce3ca438bcc.png

Bound to a merger with Paris-based LVMH Moet Hennessy Louis Vuitton SE (XPAR:MC), the New York-based jeweler markets and retails its products in over 300 stores across 20 countries. GuruFocus ranks Tiffany's profitability 8 out of 10 on several positive investing signs, which include operating margins outperforming over 93% of global competitors despite contracting over the past five years. Additionally, Tiffany's return on assets outperforms over 85% of global luxury goods producers.

b1ad2912d90a1a5edcdc5c01cca30864.png

LogMeIn

Paulson purchased 122,347 shares of LogMeIn, giving the position 0.23% weight in the equity portfolio. Shares averaged $74.54 during the quarter.

df01eef71eda489ee701df77261fe927.png

The Boston-based company provides cloud-based collaboration and connectivity solutions. GuruFocus ranks LogMeIn's profitability 7 out of 10: Although the company's three-year revenue growth rate outperforms 84.19% of global competitors, its gross margin has declined over the past five years while its operating margin underperforms 59.63% of global application software companies.

58f382e33ef82f62bb27132a2687b944.png

Innophos

Paulson purchased 160,412 shares of Innophos, giving the holding 0.11% weight in the equity portfolio. Shares averaged $32.18 during the quarter.

c817feb824815b405f9a5a679720f711.png

The Cranbury, New Jersey-based company manufactures and sells a wide range of ingredients used in food and beverage production. GuruFocus ranks Innophos' financial strength 5 out of 10: Although the company has a solid Piotroski F-score of 6, its debt ratios are underperforming over 70% of global competitors.

ef2755fa44f477d07cef826442ba36bb.png

Disclosure: No positions.

Read more here:

  • Larry Robbins' Top 6 4th-Quarter Buys in Health Care
  • Bruce Berkowitz Leaves 3 Holdings, Axes Buffett's Kraft Heinz
  • 4 Warren Buffett Holdings Trading Near 52-Week Lows



Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

This article first appeared on GuruFocus.