John Paulson is president of one of the world's most famous hedge funds. He raked in more than $5 Billion in profits for his firm, Paulson & Co., last year. Paulson got his BA from New York University‘s College of Business and Public Administration and his MBA from Harvard Business School. In 2007, during the mortgage bubble, he shorted subprime mortgages and provided enormous abnormal returns. Paulson's 2010 profit was one of the greatest returns in investment history, and one of the reasons for his fame. In 2010 Paulson won Absolute Return’s “Best Long-term Performance (over five years)” award for his Advantage Fund.
John Paulson regularly emphasizes fundamental analysis to make investments. Right now 45% of his US equity portfolio is basic materials and companies in the finance sector. Paulson’s total assets under management is about $35.9 Billion, higher than the 2010 value ($32.1 Billion). Approximately $23 Billion of his clients’ money is invested in US securities. According to Paulson’s year end letter, he transitioned the strategy from short equity bias/long distressed focus to a long equity event focus in 2010. Paulson reinvested all his gains back into the funds since inception. He also encourages his investors to make long term investments on the fund.
Paulson's 13F filings from the most recent 4 quarters reveal that in the US equity market, he usually makes short-term investments. He had invested in 149 different stocks during the year and only 6 of them remained in his portfolio until the end of the September.
The long term investments that Paulson still holds in his portfolio:
SPDR Gold Trust (GLD): Paulson has a significant bet on inflation. “While we know that there is very little inflation today, we are concerned about the impact of the quantitative easing on future inflation,” he said. He expects double digit inflation over the next few years. Because of that, 22% of his portfolio is composed of basic materials (gold). GLD is the largest one, at more than $4 Billion. His GLD investment was announced May 15th, 2009. Since then it gained 42%. It's impressive. There are several other hedge fund managers who are also invested in gold.
Kinross Gold Corp (KGC): Another gold investment that Paulson has is Kinross, with $620 Million invested. KGC was added to Paulson’s portfolio in August, 2007. Since then KGC returned 52%, while SPY returned -8%.
Boston Scientific Corp (BSX): BSX is one of Paulson’s long-term investments. The current value of this investment is $490 Million. Paulson added Boston Scientific to his portfolio in August 2006. The stock lost 56% since then, whereas SPY gained 2%. Paulson’s total loss is about $400 Million. Roberto Mignone’s Bridger Management has some BSX investments but they reduced their holdings by 10% the last time they reported their holdings.
Marshall and Ilsley Corp. (MI): Paulson added MI to his portfolio during the second quarter of 2009. Currently he has $155 Million invested. The stock gained only 1% since then, underperforming the SPY by 28 percentage points.
Regions Financial Corp (RF): Regions Financial Corp was also added during the second quarter of 2009. RF returned 43% since then, outperforming the SPY, which returned 29%.
Cheniere Energy Inc (LNG): Paulson has only $18.8 Million invested in this stock. This investment was announced August 13th, 2008. Since then the stock returned 41%, outperforming the market by 40 percentage points.
Paulson decreased the amount of Boston Scientific Group (BSX), Kinross Gold Corporation (KGC) and Regions Financial Corp (RF) shares during 2010, but he still holds a significant amount of these stocks.
Disclosure: I am long SPY.