John Paulson hits the jackpot with Horizon Buyout — These are his 2 best stocks right now

John Paulson, the billionaire who made his fortune betting on subprime mortgages at the peak of the 2007 credit bubble, has hit the jackpot again. As a major investor in Horizon Therapeutics, Paulson is in line for a $500 million payday as the biotech will be acquired by Amgen in a $27.8 billion deal.

To bring Horizon under the fold, Amgen will pay $116.50 per share in cash. This is a 267% higher price than the $31 per share average paid by Paulson, who has been a Horizon investor since 2017 and owns approximately 6.1 million HZNP shares.

If you’ve made it your investment strategy to follow Paulson’s steps, you’ll also gain big. If you haven’t, here’s a chance to review some of Paulson’s other two big interests.

We dug up the details of the pair and also ran the tickers through the TipRanks database to get a feel for Street sentiment towards these names. So, let’s see what they think of Paulson’s holdings and find out why he’s now made the pair his top stocks.

Bausch Health Companies (BHC)

The first major Paulson holding company we’ll look at is Canadian global pharmaceutical company Bausch Health. The multinational healthcare player sells generic and branded pharmaceuticals, with eye health, gastrointestinal disorders and dermatology being some of its main focuses.

Among the best-selling products are Arestin (minocycline HCl), an antibiotic used in procedures related to periodontal disease, insomnia medication Ativan (lorazepam), chest pain treatment Cardizem, and depression therapy Wellbutrin XL (bupropion hydrochloride).

Despite a long list of commercially available products, BHC stock has had a torrid time this year with its 25-year low. Shares are down 72% in 2022, with the decline starting in May after a very disappointing Q2 report.

The latest financial statement, for the third quarter, wasn’t much to write home about either. Revenue fell 2.8% year over year to $2.05 billion, while earnings per share of $0.76 fell short of the consensus estimate of $0.78. For the outlook, the company lowered its expected full-year revenue from $8.05-$8.22 billion to between $8.0-$8.17 billion. Consensus had that figure at $8.11 billion.

The company is also going through a restructuring phase, following the announcement of the spin-off of its eye care company Bausch + Lomb. An IPO took place earlier this year, but the split has yet to be completed.

In any case, Paulson seems to be a big fan. BHC stock makes up 13.33% of his portfolio, showing that he owns more than 26.4 million shares, currently worth more than $203 million.

Stifel analyst Annabel Samimy is also staying in Bausch’s corner, and she thinks the BHC story has better days ahead.

“Under new management, Bausch Health has executed the divestiture of non-core assets with priority on paying down debt and internally reinvesting in growth franchises,” the analyst explained. “The company is particularly focused on stabilizing its core franchises through sales infrastructure and new launches. We believe that if BHC demonstrates its success in stabilizing and transforming, the market will reassess the company for its franchises, which we believe have been overwhelmed by negative sentiment,” Samimy opined.

Accordingly, Samimy rates the shares a buy, while her $14 price target suggests they are undervalued by ~82%. (To view Samimy’s track record, click here)

According to TipRanks, the consensus on Wall Street is that BHC stock is a “hold” for investors. But TipRanks might as well have said “buy” – because on average analysts think the stock, currently at $7.71, could zoom to $14.40 within a year, yielding ~87% gains for new investors. (See BHC stock forecast on TipRanks)

BrightSphere Investment Group (BSIG)

The next stock to take up significant space in Paulson’s portfolio is BrightSphere Investment Group, a global asset management holding company with essentially one subsidiary under its arm: Acadian Asset Management. At the end of September, the company had approximately $83 billion in assets under management. Through Arcadian, BrightSphere gives institutional investors access to a broad selection of advanced quantitative and solution-oriented strategies where the company invests in public equities, fixed income and the alternative investment market.

The company has struggled in 2022, with sales declining throughout the year. In its recent Q3 report, revenue fell sequentially and also fell 26% from the same period a year ago to $86.8 million, while the company posted earnings per share of $0.30, which also posted a quarterly on-quarter decline. However, it should be noted that both results exceeded Street’s expectations.

However, the drop in performance doesn’t seem to bother Paulson. BSIG shares make up almost 10% of his holdings, which amounts to 8.95 million shares. At the current price, these are worth nearly $176 million.

Speaking of acquisitions, RBC analyst Kenneth Lee thinks BrightSphere’s recent actions may indicate that there could be some acquisitive action here as well.

“With BSIG pausing share buybacks through the third quarter (second consecutive quarter of no buyback), we continue to wonder whether management, despite management’s stated goal of continuing to deploy excess capital to support organic growth, and share repurchases, still wondering if management is engaged in strategic discussions (which could limit BSIG from share buybacks),” said the 5-star analyst.

“We note that management remains open to any potential value-enhancing transaction. In terms of potential acquisition considerations for BSIG, we think a valuation in the range of $25-$30 per share is plausible (9.5x on a more normalized ENI per share, plus potential acquisition premium,” Lee added.

All told, Lee rates BSIG stock as an Outperform (i.e. Buy) backed by a $23 price target, suggesting the stock will rise ~17% higher in the coming months. (To view Lee’s track record, click here)

Only one other analyst has tossed the hat with a BSIG review, and they remain sidelined, giving this stock a Moderate Buy consensus rating. (See BSIG stock forecast on TipRanks)

To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

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