John Paulson is the most successful hedge fund manager of the past four years. He made $4 billion by betting against subprime mortgage investments in 2007 and another $5 billion by betting on gold and the recovery of the economy in 2010. Paulson’s Paulson & Co. manages separate client-focused portfolios, employing merger arbitrage, long/short, and event-driven strategies. Paulson uses fundamental analysis to make his investments.
Paulson & Co. had 108 securities in its 13F portfolio valued at $34.3 billion at the end of March. We noticed that Paulson has been holding Kinross Gold Corp (KGC) and Boston Scientific CORP (BSX) during last five years. In the first quarter of 2011, he sold nine securities and bought 20 new securities.
During the first quarter of 2011, Paulson placed new bets on Hewlett Packard (HPQ) by investing $1 billion. He also purchased 6 million shares of Lubrizol Corp (LZ) and 31.7 million shares of Weyerhaeuser (WY) during the first quarter of 2011. Appaloosa’s David Tepper also increased his bet on HPQ. Tepper now has $260 million in HPQ. Paulson initiated a $800 million merger arbitrage position in Lubrizol. He isn’t expected to generate more than a few percentage points from this investment.
Paulson also increased some of his holdings significantly. He bet big on Transocean Ltd (RIG) by increasing his holdings to $1.9 billion at the end of March. He also increased his XL Group Plc (XL) position to $723 million by buying 20.8 million shares during the first quarter of 2011. He sold out his holdings in Airgas Inc (ARG) and Apollo Group Inc. (APOL) during the first quarter of 2011. Lee Hobson also sold APOL during the first quarter.
Here is how Paulson’s top picks performed since the end of March 2011:
Stock | Value | Return |
SPDR GOLD TRUST (GLD) | 4,405.6 | 7.0% |
ANGLOGOLD ASHANTI LTD (AU) | 1,968.2 | -5.1% |
TRANSOCEAN LTD (RIG) | 1,907.2 | -10.5% |
CITIGROUP INC (C) | 1,824.2 | -7.3% |
ANADARKO PETE CORP (APC) | 1,739.5 | -4.0% |
BANK OF AMERICA CORP (BAC) | 1,648.0 | -12.3% |
HARTFORD FINL SVCS GRP (HIG) | 1,182.8 | -1.1% |
HEWLETT PACKARD CO (HPQ) | 1,024.3 | -9.8% |
SUNTRUST BKS INC (STI) | 988.9 | -2.9% |
COMCAST CORP (CMCSA) | 988.8 | 1.1% |
CAPITAL ONE FINL CORP (COF) | 935.3 | 4.1% |
LUBRIZOL CORP (LZ) | 803.8 | 0.5% |
WEYERHAEUSER CO (WY) | 779.8 | -14.6% |
XL GROUP PLC (XL) | 723.2 | -5.7% |
ALPHA NATURAL RESOURCE (ANR) | 712.4 | -10.6% |
WELLS FARGO & CO (WFC) | 649.9 | -10.9% |
MYLAN INC (MYL) | 609.8 | 3.3% |
MGM RESORTS INTL (MGM) | 576.0 | 17.1% |
GOLD FIELDS LTD NEW (GFI) | 454.8 | -8.2% |
AMERICAN CAP LTD (ACAS) | 432.9 | -1.1% |
BAXTER INTL INC (BAX) | 430.2 | 9.9% |
ALCON INC (ACL) | 413.8 | 1.5% |
BLACKROCK INC (BLK) | 402.0 | -0.2% |
MEDTRONIC INC (MDT) | 366.0 | 3.0% |
CB RICHARD ELLIS GROUP (CBG) | 360.5 | -0.7% |
SMURFIT-STONE CONTAINER (SSCC) | 353.6 | 6.7% |
INTL PAPER CO (IP) | 301.8 | 3.3% |
KINROSS GOLD CORP (KGC) | 299.3 | 2.3% |
TALECRIS BIOTHERAPEUTICS (TLCR) | 294.8 | 7.5% |
NOVAGOLD RES INC (NG) | 261.9 | -11.4% |
Value Weighted Return | 27,839 | -2.2% |
SPY | N/A | 0.7% |
Paulson's largest stock holdings have lost 2.2% since the end of first quarter 2011, vs. a 0.7% gain for the SPY.
GLD was Paulson's biggest investment at the end of March 2011. GLD has gained 7.0% since then, outperforming the SPY’s 0.7% return. Paulson had $4.4 billion invested in GLD at the end of March. Paulson bought 31.5 million shares of GLD during the first quarter of 2009 with an average price of $79.8-97.8. GLD recently traded at $149.7. Paulson made more than $1.6 billion with his GLD investment. 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. Daniel Loeb’s Third Point is also investor in GLD. There are several other hedge funds that invest in gold through gold miners or hold physical gold.
SPDR GOLD TRUST (GLD) | ||||
Quarter | Max and Min Adj. Prices | Average Adjusted Price | Paulson's Shares | Average |
2009_1 | Max $97.8 Min $79.8 | 89.6 | 31,500 | 2,822 |
2009_2 | Max $96.4 Min $89.3 | 90.6 | 31,500 | 2,854 |
2009_3 | Max $99.9 Min $89.3 | 94.3 | 31,500 | 2,970 |
2009_4 | Max $119.2 Min $97.9 | 107.8 | 31,500 | 3,396 |
2010_1 | Max $112.9 Min $104 | 108.7 | 31,500 | 3,424 |
2010_2 | Max $122.8 Min $110.3 | 117.2 | 31,500 | 3,692 |
2010_3 | Max $128 Min $113.5 | 120 | 31,500 | 3,780 |
2010_4 | Max $139.1 Min $128.5 | 133.8 | 31,500 | 4,215 |
2011_1 | Max $140.3 Min $127.9 | 135.3 | 31,500 | 4,262 |
Current | N/A | 149.7 | N/A | 4,716 |
Anglogold Ashanti was Paulson's second biggest investment at the end of March 2011. AU has lost 5.1% since then, underperforming the SPY’s 0.7% return. Paulson had $1.97 billion invested in AU at the end of March. Paulson had included AU in his portfolio during the first quarter of 2009. During the second quarter of 2009, he increased his holdings in AU with a price of $33.7-42. AU recently traded at $49.4.
Stock | ANGLOGOLD ASHANTI LTD (AU) | |||
Quarter | Max and Min Adj. Prices | Average Adjusted Price | Paulson's Shares | Average |
2009_1 | Max $32.4 Min $21.1 | 29.7 | 2,939 | 87 |
2009_2 | Max $42 Min $33.7 | 35.3 | 42,850 | 1,513 |
2009_3 | Max $46.6 Min $37.3 | 38.3 | 42,850 | 1,641 |
2009_4 | Max $46.2 Min $36.1 | 42.5 | 42,850 | 1,821 |
2010_1 | Max $46.6 Min $34.5 | 38.1 | 43,750 | 1,667 |
2010_2 | Max $43.1 Min $36 | 41.4 | 43,750 | 1,811 |
2010_3 | Max $44.6 Min $38.9 | 42.5 | 41,000 | 1,743 |
2010_4 | Max $51.1 Min $41.9 | 47.7 | 40,949 | 1,953 |
2011_1 | Max $50.4 Min $42.9 | 45.9 | 41,047 | 1,884 |
Current | N/A | 49.4 | N/A | 2,028 |
Citigroup lost 7.3% since the end of the first quarter. Paulson had $1.8 billion invested in C at the end of March. He initially added C to his portfolio during the third quarter of 2009 with a price of $32-$50. Later Paulson added to his position when the stock went down to $32 from $50. Recently C traded at $41. Citigroup is one of the favor stocks that hedge funds and analysts love. Bruce Berkowitz's Fairholme, Randall Smith's Alden Global Capital and Bill Ackman's Pershing Square also have huge C positions.
CITIGROUP INC (C) | |||||
Quarter | Max and Min Prices | Average Price | Paulson's Shares | Average | |
2009_3 | Max $50 Min $32 | 38.6 | 30,000 | 1,158 | |
2009_4 | Max $50 Min $32 | 41 | 50,670 | 2,077 | |
2010_1 | Max $43.1 Min $31.5 | 35.7 | 50,670 | 1,809 | |
2010_2 | Max $49.7 Min $36.3 | 41.5 | 50,670 | 2,103 | |
2010_3 | Max $43 Min $36.6 | 39.4 | 42,400 | 1,671 | |
2010_4 | Max $48.1 Min $39.5 | 43.5 | 41,353 | 1,799 | |
2011_1 | Max $51.3 Min $43.9 | 47.3 | 41,272 | 1,952 | |
Current | N/A | 41 | N/A | 1,692 | |
COF has been one of the profitable investments for Paulson. COF returned 4.1% since the end of the first quarter. Paulson had $935 million invested in COF at the end of March. Paulson had included COF in his portfolio during the first quarter of 2009 as the stock price was hovering between $8 and $33. During the second quarter of 2009, he increased his holdings in COF. COF recently traded at $54. Edward Lampert's Esl Investments, Bill Miller's Legg Mason Capital Management, Clint Carlson's Carlson Capitals and Ray Dalio's Bridgewater Associates are other high profile COF investors.
CAPITAL ONE FINL CORP (COF) | ||||
Quarter | Max and Min Prices | Average Price | Paulson's Shares | Average |
2009_1 | Max $32.8 Min $8.2 | 15.9 | 2,100 | 33 |
2009_2 | Max $31 Min $20.3 | 20.6 | 17,000 | 350 |
2009_3 | Max $40.8 Min $32.9 | 31.8 | 17,000 | 541 |
2009_4 | Max $40.8 Min $32.9 | 38 | 17,000 | 646 |
2010_1 | Max $42.7 Min $34.4 | 38.7 | 17,000 | 658 |
2010_2 | Max $46.5 Min $37.9 | 42.6 | 17,000 | 724 |
2010_3 | Max $44.8 Min $37 | 39.9 | 15,000 | 599 |
2010_4 | Max $42.7 Min $36.5 | 39.4 | 18,000 | 709 |
2011_1 | Max $52.7 Min $43.6 | 49.3 | 18,000 | 887 |
Current | N/A | 54 | N/A | 972 |
Transocean has been Paulson’s biggest new investment in the first quarter of 2011. Paulson increased his RIG holdings by nearly 240% during the first quarter by buying 17.3 million RIG shares. Paulson's cost is between $68.6 and $84.5 per share. RIG lost 10.5% since the end of the first quarter. RIG recently traded at $69 and presents a buy chance with its current price which is lesser than Paulson's cost. Paulson holds 7.7% of RIG shares with his $1.9 billion investment at the end of March. Leon Cooperman’s Omega Advisors had $61 million and Phill Gross’ Adage Capital had $33 million in RIG at the end of March. Jeffrey Tannenbaum’s Fir Tree had $208 million in RIG call options at the end of December.
TRANSOCEAN LTD (RIG) | ||||
Quarter | Max and Min Prices | Average Price | Paulson's Shares | Average |
2010_4 | Max $72 Min $61.2 | 66.4 | 7,200 | 478 |
2011_1 | Max $84.5 Min $68.6 | 78.5 | 24,468 | 1,921 |
Current | N/A | 69 | N/A | 1,688 |
Disclosure: I am long C.
