John Paulson has done an about-face since his very bearish position last year. First it was the reflation trade, now it is full blown bullishness. In a presentation earlier this week, Paulson said he still finds the equity markets very compelling and currently has no short positions in the credit markets – where he made a killing shorting sub-prime in 2008. Paulson said:
Today our net long exposure is perhaps the highest it has ever been in our portfolio. We still find a lot of compelling long investments on the equity side.
Among the stocks Paulson likes are Bank of America (BAC), Comcast (CMCSA) and Heidelberg Cement. He described B of A as “a great buy today” at $15.50. He added that the worst phase of the credit crunch for the banks is behind us (a position Meredith Whitney disagrees with).
In terms of credit, Paulson has no short positions. In fact, he is long GMAC debt due in September 2011. He says GMAC (GMA), with its pseudo government guarantee is just as good as treasuries, but yields substantially higher. He says:
instead of buying a Treasury bond which yields 84 basis points, I can buy GMAC which is almost, I consider equivalent to a government bond and I can get 11 percent. That is why we have allocated so much money to this particular security.
Of course, Paulson’s most famous position has become his massive gold holdings. Not only is he starting a gold fund, but as of the end of last quarter Paulson had almost 50% of his fund invested in gold. He views gold as the very best hedge against the dollar devaluation story and the inevitable inflation the Fed is causing.