Tags: Paulson | fund | merger | stock

USA Today: Paulson Fund Rises 14 Percent on Merger Boom

By    |   Wednesday, 01 April 2015 07:40 AM

The merger mania sweeping through corporate suites has been very, very good to hedge fund legend John Paulson, founder of Paulson & Co.

The Paulson Enhanced fund, which focuses on mergers and acquisitions, soared 13.9 percent from the beginning of the year through March 20, according to data from Swiss bank SYZ obtained by USA Today.

Two other Paulson merger-based funds, Paulson International and Paulson Advantage, gained 6.6 percent and 5 percent during the period, respectively.

One merger-related stock that has benefited Paulson is Salix Pharmaceuticals. It has soared 50.4 percent so far this year, buoyed by Valeant Pharmaceutical's agreement to buy the company for $11 billion, or $173 a share in cash.

Paulson purchased the stock in 2014, when it was trading around $102 a share, which means it has jumped 69 percent. Salix now represents Paulson's sixth largest holding, according to FactSet.

Paulson expects the M&A boom to continue. "We remain well-positioned to take advantage of attractive merger related opportunities in the robust M&A environment," he wrote in a letter to investors in February.

When it comes to the stock market as a whole, the S&P 500 index continues to flirt with its record high.

But many analysts see the market's correction and volatility last week as a sign that more of the same is on the way.

"I do think it is going to be volatile. It is just going to be a bumpier ride," Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, told The Wall Street Journal.

The S&P 500 fell 2.2 percent last week, and biotechnology stocks were especially hard hit. The S&P Biotechnology stock index dropped 6.6 percent in the first four days of the week.

Meanwhile, price-earnings ratios indicate stocks may be overvalued. Robert Shiller's cyclically adjusted price-earnings ratio for the S&P 500, which includes 10 years of earnings, stands at 27.4, topped only by 1929, 2000 and 2007. Those, of course, were periods that preceded market crashes.

And it looks like first-quarter reports will be nothing to write home about, with analysts forecasting a 4.6 percent drop in earnings for S&P 500 companies, according to FactSet.

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The merger mania sweeping through corporate suites has been very, very good to hedge fund legend John Paulson, founder of Paulson & Co.
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Wednesday, 01 April 2015 07:40 AM
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