John Paulson's Favorite Holdings

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Includes: ACAS, ACL, ANRZQ, APC, AU, BAC, BAX, BLK, BRK.A, C, CBG, CMCSA, COF, GFI, GLD, HIG, HPQ, IP, KGC, MDT, MGM, MYL, NG, RIG, SSCC, STI, TLCR, WFC, WY, XL
by: Insider Monkey

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 (NYSE:KGC) and Boston Scientific CORP (NYSE: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 (NYSE:HPQ) by investing $1 billion. He also purchased 6 million shares of Lubrizol Corp (LZ) and 31.7 million shares of Weyerhaeuser (NYSE: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 (NYSE:RIG) by increasing his holdings to $1.9 billion at the end of March. He also increased his XL Group Plc (NYSE: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. (NASDAQ: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
(Millions)

Return
Since Mar 31,2011

SPDR GOLD TRUST (NYSEARCA:GLD)

4,405.6

7.0%

ANGLOGOLD ASHANTI LTD (NYSE:AU)

1,968.2

-5.1%

TRANSOCEAN LTD (RIG)

1,907.2

-10.5%

CITIGROUP INC (NYSE:C)

1,824.2

-7.3%

ANADARKO PETE CORP (NYSE:APC)

1,739.5

-4.0%

BANK OF AMERICA CORP (NYSE:BAC)

1,648.0

-12.3%

HARTFORD FINL SVCS GRP (NYSE:HIG)

1,182.8

-1.1%

HEWLETT PACKARD CO (HPQ)

1,024.3

-9.8%

SUNTRUST BKS INC (NYSE:STI)

988.9

-2.9%

COMCAST CORP (NASDAQ:CMCSA)

988.8

1.1%

CAPITAL ONE FINL CORP (NYSE: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 (NYSE:WFC)

649.9

-10.9%

MYLAN INC (NASDAQ:MYL)

609.8

3.3%

MGM RESORTS INTL (NYSE:MGM)

576.0

17.1%

GOLD FIELDS LTD NEW (NYSE:GFI)

454.8

-8.2%

AMERICAN CAP LTD (NASDAQ:ACAS)

432.9

-1.1%

BAXTER INTL INC (NYSE:BAX)

430.2

9.9%

ALCON INC (NYSE:ACL)

413.8

1.5%

BLACKROCK INC (NYSE:BLK)

402.0

-0.2%

MEDTRONIC INC (NYSE:MDT)

366.0

3.0%

CB RICHARD ELLIS GROUP (NYSE:CBG)

360.5

-0.7%

SMURFIT-STONE CONTAINER (NYSE:SSCC)

353.6

6.7%

INTL PAPER CO (NYSE:IP)

301.8

3.3%

KINROSS GOLD CORP (KGC)

299.3

2.3%

TALECRIS BIOTHERAPEUTICS (NASDAQ:TLCR)

294.8

7.5%

NOVAGOLD RES INC (NYSEMKT:NG)

261.9

-11.4%

Value Weighted Return

27,839

-2.2%

SPY

N/A

0.7%

Click to enlarge

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
(X1000)

Average
Value
(millions)

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

Click to enlarge

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
(X1000)

Average
Value
(millions)

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

Click to enlarge

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
(X1000)

Average
Value
(millions)

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

Click to enlarge

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
(X1000)

Average
Value
(millions)

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

Click to enlarge

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
(X1000)

Average
Value
(millions)

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

Click to enlarge

Disclosure: I am long C.