Portfolio Tracking: John Paulson vs. Martin Whitman

by: Davy Bui

Scanning the 13F-HR SEC filing of Paulson and Co. suggests that John Paulson employs an active trading strategy. Readers can best view Paulson's moves in spreadsheet format but some broader themes do emerge:

  • Similar to some of the other money managers already profiled here (Berkowitz, Klarman), Paulson is bullish in the financial sector, as evidenced by sizable new positions in Wells Fargo (NYSE:WFC), JP Morgan Chase (NYSE:JPM) warrants, CIT Group (NYSE:CIT) and Bank of America Units to complement his already huge holding of the bank's common stock (NYSE:BAC). Paulson's fund also added substantively to existing stakes in Citigroup (NYSE:C) and Suntrust Bank (NYSE:STI).
  • While Paulson made some big moves in the financial sector, his single largest new add was Comcast (NASDAQ:CMCSA), the cable and now media company.
  • Upon examining its holdings, it is evident the fund heavily employs a merger arbitrage strategy. The three large divestitures -- Schering Plough (SGP), Wyeth (WYE) and Liberty Media -- were all related to corporate merger/spin-off activity.
  • Perhaps the most intriguing insight to be gleaned from Paulson's holdings is that he appears to be a financial sector bull and a gold bug. The single largest holding revealed in the filing is the gold ETF (NYSEARCA:GLD) and the fund also has large stakes in several gold miners: AngloGold Ashanti (NYSE:AU), Gold Fields (NYSE:GFI) and Kinross Gold (NYSE:KGC). Apparently, Paulson has taken the stance that the financial sector can thrive despite the massive economic uncertainty that a large gold holding would imply. Or, perhaps one is a hedge on the other.

Martin Whitman is receding more into the background these days and letting other managers helm the funds at Third Avenue. As such, Third Avenue's 13F-HR filing (available here in spreadsheet format) may not be a good reflection of Whitman's thinking. Whitman has always been a big proponent of moving into the financial sector at times of crisis but this time around, he was too early and picked some bad stocks to play. Despite numerous funds and managers, Third Avenue's filing was rather sedate:

  • Interestingly enough, Third Avenue fully divested its CIT Group stake in the same quarter that so many other managers were building new positions -- sometimes, being early is the same as being wrong. However, it hasn't given up on financials, as Keycorp (NYSE:KEY) was the only true new position opened last quarter.
  • The other new holding shown, Cenovous Energy (NYSE:CVE), was spun off from Encana (NYSE:ECA) in an effort to better isolate Encana's natural gas assets.

View both funds' holdings in spreadsheet format:

Disclosure: No positions