You have no doubt heard about the losses many hedge funds are enduring as their energy bets have tumbled over 50% in the past few months. Among those damaged funds were those run by John Paulson.
What surprised me was to learn he also lost big on telecom companies like Vodafone (VOD – Analyst Report) and Sprint (S – Analyst Report) which lost 30.4% and 61.4% respectively in 2014.
At the end of the third quarter of last year, Paulson’s 64.1 million shares of Sprint were worth $406.5 million. That was when the stock was trading above $6.
That stake was worth $689.6 million at the end of 2013 when Paulson added 7.5 million shares and the stock closed the year at $10.75.
Why He Lost: Earnings Decline
Without getting into the weeds of the telecom business, we can see why the stock has had plenty of sellers driving the shares down. Below are the EPS estimate tables which tell the tale of a steady decline in just the past 90 days that pushed it to a Zacks #5 Rank…
While many large investors seem comfortable buying Amazon (AMZN – Analyst Report) shares as that giant’s profits slip away but revenues keep climbing, not many are as patient with Sprint and its nearly $35 billion in sales.
And while the stock looks “inexpensive,” until the earnings picture turns around it could get even cheaper. Keep an eye on the Zacks Rank to tell you when it’s safe to run with Sprint again.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money Trader.