Hedge Fund Portfolio Tracking: Paulson & Co., Q4 2008

by: Market Folly

This is the Fourth Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings, preface.

Paulson & Co. is run by John Paulson. His hedge fund has generated massive returns over the past two years, as he bet against financials and all things subprime. One of his funds was even up 589%. Most recently, he has profited by shorting U.K. banks. Although Paulson is obviously one of the main brains behind the operation, there are also many other talented individuals in the organization. One of its co-portfolio managers has left to start his own fund, and we'll be keeping an eye on that. At the end of 2008, his Advantage Plus fund ended the year +37.58%, as detailed in our year-end 2008 hedge fund performance post. For more info on how Paulson performed in 2008, be sure to check out its year-end letter & report.

The following were its long equity, note, and options holdings as of December 31, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that it initiated in the last quarter):

  • AT&T (NYSE:T)
  • Embarq (EQ)
  • iStar Financial (SFI)
  • Liberty Media Corp (LMDIA)
  • National City (NCC)
  • Northern Trust (NASDAQ:NTRS)
  • Peoples United Financial (NASDAQ:PBCT)
  • St Jude Medical (NYSE:STJ)
  • Teva Pharmaceutical (NASDAQ:TEVA)
  • Centennial Communication (CYCL)
  • Proshares Ultrashort Financial (NYSEARCA:SKF)
  • Wells Fargo (NYSE:WFC)
  • Wachovia (NASDAQ:WB)

Some Increased Positions (A few positions it already owned, but added shares to):

  • Merrill Lynch (MER): Increased position by 327%
  • BCE (NYSE:BCE): Increased position by 308%
  • Genentech (Private:DNA): Increased position by 242%
  • NRG Energy (NYSE:NRG): Increased position by 163%
  • Cheniere Energy (NYSEMKT:LNG): Increased position by 60%
  • Philip Morris International (NYSE:PM): Increased position by 50%
  • Rohm & Haas (ROH): Increased position by 20.5%
  • Boston Scientific (NYSE:BSX): Increased position by 18%

Some Reduced Positions (Some positions it sold some shares of):

  • Brocade Communications (NASDAQ:BRCD): Reduced position by 28.6%

Removed Positions (Positions the firm sold out of completely):

  • Anheuser Busch (BUD)
  • Barr Pharmaceuticals (BRL)
  • Applied Biosystems (inactive)
  • Hercules Offshore (NASDAQ:HERO)
  • Macrovision (MVSN)
  • Wrigley (WWY)

Top 20 Holdings (by % of portfolio):

  1. Rohm & Haas (ROH): 18.36% of portfolio
  2. Boston Scientific (BSX): 12.64% of portfolio
  3. UST (UST): 11.31% of portfolio
  4. Kinross Gold (NYSE:KGC): 8.66% of portfolio
  5. BCE (BCE): 7.7% of portfolio
  6. Wachovia (WB): 7.62% of portfolio
  7. Philip Morris International (PM): 6.45% of portfolio
  8. Mirant (MIR): 5.72% of portfolio
  9. Genentech (DNA): 4.68% of portfolio
  10. Merrill Lynch (MER): 2.68% of portfolio
  11. National City (NCC): 2.54% of portfolio
  12. NRG Energy (NRG): 2.02% of portfolio
  13. At&t (T): 1.41% of portfolio
  14. Ultrashort Financials (SKF): 1.36% of portfolio
  15. Embarq (EQ): 1.18% of portfolio
  16. Northern Trust (NTRS): 0.79% of portfolio
  17. Peoples United Financial (PBCT): 0.72% of portfolio
  18. Liberty Media (LMDIA): 0.68% of portfolio
  19. Centennial Communications (CYCL): 0.66% of portfolio
  20. St. Jude (STJ): 0.54% of portfolio

Assets from the collective long U.S. equity, options, and note holdings were $7 billion last quarter and were $6 billion this quarter. Keep in mind that many of Paulson's holdings are not listed in these filings because they aren't equities, but rather securities in other markets. However, as evidenced above, Paulson does hold a decent amount of equities due to merger arbitrage and other strategies. We'd be remiss if we didn't also point out that Paulson's team has been hard at work, as they recently filed 13Gs on Rohm & Haas and Boston Scientific.

This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. Look for our updates of the other funds over the next few weeks.