Paulson Takes $1 Billion Hewlett-Packard Stake, Adds to Gold Bet

Paulson & Co., the $36 billion hedge fund founded by John Paulson, took a stake in Hewlett-Packard Co. (HPQ) and increased its holding of Transocean Ltd. (RIG), adding companies undergoing transformations to its bets on gold.

Paulson bought 25 million shares in Hewlett-Packard, valued at about $1 billion, according to a regulatory filing yesterday. The New York-based fund added 17.3 million shares of Transocean, lifting its stake to 7.7 percent and making Paulson the largest holder of the Vernier, Switzerland-based offshore driller.

The hedge fund has said it expects to make money in the next two years with the stocks of companies going through bankruptcy, restructuring or reorganization. Transocean, the owner and operator of the Deepwater Horizon drilling rig that exploded a year ago, was sued by BP Plc last month for billions of dollars in damages related to the oil spill. Hewlett-Packard is pushing deeper into software to try to reverse a 22 percent drop in its shares in the past year.

Armel Leslie, a spokesman for Paulson, declined to comment on the stock purchases.

Leo Apotheker, who took over as Hewlett-Packard’s chief executive officer Nov. 1, outlined his strategy for the first time on March 14. The company is starting a cloud-computing service that will let developers create applications for consumers and businesses that run on HP servers, Apotheker said at the time.

‘Another Tough Quarter’

Apotheker told top executives earlier this month that he’s bracing for “another tough quarter” in the Palo Alto, California-based company’s fiscal third quarter and urged deputies to “watch every penny and minimize all hiring.” HP said in February that sales for its second quarter, which ended in April, would miss analysts’ sales and profit estimates.

Hewlett-Packard fell $2.89, or 7.3 percent, to $36.91 at 4:15 p.m. in New York Stock Exchange composite trading. Transocean has dropped about 26 percent since the April 20, 2010, explosion of the Deepwater Horizon in the Gulf of Mexico. It fell 69 cents, or 1 percent, to $67.80 in New York today.

Paulson’s largest fund, Advantage Plus, which bets on corporate events such as takeovers and bankruptcies, lost 1.7 percent this year through April with its dollar-denominated shares.

Transocean, the world’s largest offshore driller, this month reported its biggest first-quarter profit decline in nine years amid a worldwide surfeit of rigs used to find oil and natural gas. New U.S. drilling rules enacted after last year’s disaster increased costs and forced the company to spend more time carrying out shipyard work during the quarter, Transocean has said.

Gold Stakes

Paulson also bought 6 million shares in Lubrizol Corp. (LZ), the engine-additives maker that Warren Buffett’s Berkshire Hathaway Inc. agreed in March to buy for about $9 billion. Wickliffe, Ohio-based Lubrizol said this month its plan to sell itself is unaffected by disclosures of David Sokol’s investments in the firm as he pushed for Buffett, his then-boss at Berkshire Hathaway, to buy the firm. Paulson’s stake in Lubrizol was valued at about $804 million.

Paulson kept his $4.41 billion holding of shares in the SPDR Gold Trust unchanged and added to stakes in mining companies including Johannesburg-based AngloGold Ashanti Ltd. His fund bought 97,540 American depositary receipts in South Africa’s biggest gold producer last quarter, as well as 2 million ADRs in Gold Fields Ltd., its second-largest producer.

Soros Sells

Paulson has been betting on a global economic recovery, and has purchased gold to protect against inflation. Paulson’s investors can choose to have their stakes denominated in gold rather than dollars, meaning the value of their investment rises and falls with the price of the bullion.

George Soros, the billionaire founder of Soros Fund Management LLC, sold most of his holdings in the bullion-backed SPDR Gold Trust and iShares Gold Trust funds in the first quarter, while buying shares of mining companies Goldcorp Inc. (G) and Freeport-McMoRan Copper & Gold Inc.

Soros’s fund held 49,400 shares of SPDR Gold Trust as of March 31, compared with 4.721 million at the end of the fourth quarter. The New York-based fund sold all 5 million shares it held in iShares Gold Trust. Soros bought 301,300 shares of Freeport-McMoRan and 7,600 of Goldcorp.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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Paulson & Co. Founder John Paulson

Jin Lee/Bloomberg

Paulson & Co. founder John Paulson.

Paulson & Co. founder John Paulson. Photographer: Jin Lee/Bloomberg