John Paulson, manager of Paulson & Co., and perhaps best-known for his famous bet against sub-prime mortgages prior to the housing crisis of 2007, believes a house as a primary residence is the best investment, and he suggested there some stocks may be worth buying on speculation of potential mergers and acquisitions.
At the Delivering Alpha Conference last week, he told CNBC’s Melissa Lee, “I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you’re the owner-occupier of.” He added that buying a property and renting it out is not an option that he is “as excited about, ” and continued:
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“Today financing costs are extraordinarily low. You can get a 30-year mortgage somewhere around 4.5 percent. And if you put down, let’s say, 10 percent and the house is up 5 percent, which is the latest data, then you would be up 50 percent on your investment. And you’ve locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed.”
John Paulson thinks that housing is bottoming, and this gives potential homeowners a chance to buy a property at a reasonable price.
He moved on to the topic of potential mergers and acquisitions, and thinks the motto for companies nowadays is “hunt or be hunted.” Those companies that do not buy other companies are in danger of hostile takeover bids. One example is the hostile bid by Valeant Pharmaceuticals, aided by activist investor Bill Ackman, to take over Botox-producer Allergan. Paulson, whose fund owns shares of Allergan, is in favor of the deal, and believes that Valeant will allow Allergan to trim costs. Allergan CEO David Pyott has rejected a takeover because he is concerned that Valeant’s cost-cutting proposals could threaten Allergan’s research and development budget.
John Paulson’s prediction that either Whiting Petroleum or Kodiak Oil & Gas would be taken over was prescient; last week, it was announced Whiting will buy Kodiak, and Paulson thinks the acquirer’s stock can ride higher. He also identified Oasis Petroleum as another potential takeover target in the oil and gas space; “Oasis is too attractive to just sit there at its current level.”
