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Legendary Hedge Fund Manager John Paulson’s Hedge Fund, Paulson & Co is having a tough time with one of its biggest investments Sino Forest (OTC:SNOFF), plummeting under the allegation that company has done financial fraud. Even his other investments don’t appear to be doing well. The following is a brief snapshot of the stock market performance of the top his top quarterly buys (as per 13F filing):

Top New Buys

Stock

Symbol

Change in Shares

31 March Price

17 June Price

Percentage Change

JC Penney Company Inc

(NYSE:JCP)

2,281,035

35.91

34.29

-5%

Metlife Inc

(NYSE:MET)

2,299,115

44.73

40.37

-10%

SL Green Realty Corp

(NYSE:SLG)

1,400,000

75.20

82

9%

Scripps Networks Interactive Inc

(NYSE:SNI)

3,000,000

50.09

47.14

-6%

Family Dollar Stores Inc

(NYSE:FDO)

3,455,000

51.32

52.6

2%

Smurfit-stone Container Corp

(NYSE:SSCC)

9,150,000

38.65

-

-

Alpha Natural Resources Inc

(NYSE:ANR)

12,000,000

59.37

40.98

-31%

Weyerhaeuser Co

(NYSE:WY)

31,700,200

24.60

20.24

-18%

Lubrizol Corporation

(LZ)

6,000,000

133.96

134.25

0%

Hewlett-Packard Company

(NYSE:HPQ)

25,000,000

40.97

35

-15%

Top Position Increases

Stock

Symbol

Change in Shares

31 March Price

17 June Price

Percentage

Barrick Gold Corporation

(NYSE:ABX)

500,000

51.91

43.18

-17%

Randgold Resources Ltd

(NASDAQ:GOLD)

205,000

81.54

75.13

-8%

Boise Inc

(NYSE:BZ)

6,941,900

9.16

6.75

-26%

Lear Corp

(NYSE:LEA)

2,100,188

48.87

48.57

-1%

Veeco Instruments Inc

(NASDAQ:VECO)

772,000

50.84

50.28

-1%

International Paper Co

(NYSE:IP)

7,441,700

30.18

26.57

-12%

Baxter International Inc

(NYSE:BAX)

3,000,000

53.77

58.34

8%

Transocean Ltd

(NYSE:RIG)

17,267,500

77.95

61.27

-21%

Xl Group Plc

(NYSE:XL)

20,824,575

24.60

21.32

-13%

Gold Fields Ltd

(NYSE:GFI)

2,000,000

17.46

14.23

-18%

The S&P 500 has declined 4.1% from 31 March to 17 June, while Paulson’s top new buys witnessed an average decline of 9% (excluding Smurfit-stone and Lubrizol which are takeover candidates). Paulson’s top ten position increases fared worse, declining 10.9% on an average.

Here is a brief analysis of five relatively better performing stocks from Paulson's top buys:

Baxter International Inc. is a leading worldwide supplier of critical care medical supplies, devices, and injectibles.

Recommendation: Neutral

Baxter seems to be exiting a tough 12-16 month stretch that saw unanticipated slowdown in sales of IVIG/Plasma and pressure on gross margins, HC Reform costs, return of WinRho rights to Cangene ($50-60mn annualized hit) and a significant UK Recombinant tender loss (estimated to result in loss of $100mn of Recombinant sales).

On the positive front, Q1 volume growth of IVIG/Plasma is encouraging and the launch of new formulations over the next 12-18 months is expected to contribute to price premiums. Specifically, Gammagard product line extensions are the most important in the near term. In addition, the impact of HC Reform costs, WinHo Rights, and Recombinant loss of tender would have been relegated to the past. Octapharma’s return in H2 looks conservative, continuing to benefit Baxter.

However, concerns remain on the ongoing impacts of the Colleague pump recall and Castlebar PD manufacturing difficulties. Though shares are currently trading at a discount to the group, a wait and watch strategy before investing would be more appropriate, until stability and upward visibility further strengthen.

Family Dollar Stores Inc operates the second largest chain of retail discount stores in the US, across 44 states, for low to middle income consumers. Merchandise categories include consumables, home products, apparel and accessories, electronic and seasonal items at price points ranging from $1- $10.

Recommendation: Neutral

FDO, like other retails stores in its segment, will face higher pressures on its margins given the twin challenges of rising sourcing costs and continued difficulties of the lower end consumer. According to consensus estimates, the growth this year is expected to be 20.2% as opposed to a sector growth of 21.6%. For the next year, FDO growth is expected to be 15.2% vs. a sector growth of 18.4%, making it an unattractive investment option for now.

In addition, competitive pressures from players like Dollar General which are looking at capturing increasing market share could force FDO to absorb increasing cost pressures. In the near term, the recommendation on FDO remains neutral.

However, do note that Pershing Square disclosed its ownership in FDO as 8.9% of outstanding shares on 6/9 as compared to a disclosed stake of 4.7% on 5/26, describing the investment as ‘passive’.

JCPenney operates 1108 stores in the 48 states of US and in Puerto Rico. Their merchandise line consists of apparel, footwear, accessories, fine and fashion jewellery, beauty products and home furnishings. Products are moderately priced with the target segment being the middle income customers.

Recommendation: Neutral

The industry continues to face margin pressures as well as increasing input costs. Given higher labour and raw material prices, apparel input costs are expected to continue to increase in 2011. Consumer demand remains volatile and is expected to take some quarters to stabilize. On the positive side, the induction of Ron Johnson [SVP, Apple (NASDAQ:AAPL)] as the new CEO brings some good cheer as well as high expectations. Johnson led the highly successful retail strategy of Apple, prior to which he spent 15 years in Target (NYSE:TGT) where he was highly regarded.

SL Green Realty is a self administered and self managed realty estate investment trust that acquires, owns and manages a portfolio of primarily Class A office buildings in Manhattan. The company’s portfolio consists of 22 million square feet of office properties in Manhattan and 6.8 million square feet in Connecticut and Westchester.

Recommendation: Buy

Going forward, most of the analysts expect office occupancy to increase in both NYC and the suburban areas. SL Green Realty’s strategy of transition towards larger assets with high quality tenants and leases has helped increase the quality of its portfolio as well. Its 1Q11 results also exceeded the market expectations due to realization of substantial gains related to sale of investments, totaling $46.2 million.

Veeco Instruments provides process equipment and metrology tools for the data storage, semi-conductor, HB-LED wireless, and scientific research markets. VECO’s products enable advancements in the fields of nanoscience, nanobiology and other areas of scientific and industrial research.

Recommendation: Buy

VECO’s new management has focused on cutting costs and emphasizing three primary markets: High brightness light emitting diode (HBLED), Solar manufacturing equipment and data storage manufacturing equipment – wherein, it is a leader in each market.

It continues to draw a BUY rating from analysts given the continued strengthening of subsidy driven demand from China, as well as rapid adaption of its new MaxBright tool in China and Taiwan. The China market itself is expected to remain robust well into 1H12. The consensus target price for the stock is $56.32 on a 12 month basis.

Source: Rating 5 Relatively Good Performing Stocks From Paulson's Top Buys