Paulson & Co. was founded in 1994 by John Paulson. The company invests in the public equity markets across the globe. It is a fundamental research driven hedge fund that employs merger arbitrage, long/short, and event-driven strategies to pick its securities. John Paulson received his bachelor's degree in finance from New York University and earned his MBA from Harvard Business School. He personally made $5 Billion in 2010.
During the second sector, Paulson added a number of new stocks to its portfolio. We also included his large transactions in our table because these transactions show new conviction in these stocks. Unfortunately, since the end of the second quarter, Paulson & Co.’s top new stock picks has lost 14.9% versus the S&P 500’s 10.7% loss during the same period.
John Paulson’s Top stock picks at the end of June
Company | Ticker | Value (x1000) | Activity | Return Since June |
CAPITAL ONE | 1090237 | 17% | -18% | |
WELLS FARGO | 942816 | 64% | -13% | |
ROCK TENN CO | 294401 | 344% | -24% | |
RALCORP HOLDINGS | 319653 | 823% | -2% | |
SALIX PHARMA | 59745 | 971% | -29% | |
LIFE TECHNOLOGIES | 391566 | New | -23% | |
SAVVIS INC | 225321 | New | #N/A | |
NEWS CORP | 184080 | New | -8% | |
SOUTHERN UNION | 181880 | New | 4% | |
MOSAIC CO. | 152393 | New | 3% | |
TENET HEALTHCARE | 124800 | New | -19% | |
WALTER ENERGY INC | 115800 | New | -33% | |
GRIFOLS SA | 107145 | New | -9% | |
N Y S E EURONEXT | 102810 | New | -24% | |
M G M RESORTS INTL | 83353 | New | -22% | |
RLJ LODGING | 47768 | New | -25% | |
AGNICO EAGLE MINES | 44243 | New | 13% | |
STATE BANK FINL | 38060 | New | -21% |
Paulson’s low average return since the end of June owes to several of the hedge fund’s large positions suffering losses. For instance, Paulson initiated a brand new $392 Million position in Life Technologies Corp, which was also Paulson’s biggest new position during the second quarter. However, LIFE had a loss of 23% since the end of June. Other main holders of LIFE are Sageview Capital and Glenview Capital which increased its position by 42% (check out Glenview’s top stock picks). Paulson also had major losses in Capital One. This $1 Billion position lost 18%. Walter Energy Inc. was also a $116 Million new position and it was losing 33% as of Friday. Fortunately the stock got a huge jump today because of takeover speculation.
The second largest new position of Paulson at the end of June is Savvis Inc. The hedge fund initiated a $225 Million position in SVVS. Savvis merged with CenturyLink in July. CenturyLink paid Savvis’ stockholders $30 per share in cash and $10 in CenturyLink’s shares to close the transaction. Ervin Shindell and Jane Mendillo are among the prominent investors with large SVVS positions (check out Ervin’s top stock picks).
In addition to adding new positions, Paulson also increased a few positions in his fund during the second quarter. For example, Paulson increased his holdings in Ralcorp Holdings by 823% to $320 Million. The stock lost 2% but outperformed the market by 8%. Other main investors in RAH include Gruss Asset Management and TIG Advisors (check out Gruss’s top stock picks).
We like John Paulson and his Paulson & Co. hedge fund. Although his new stock picks and his entire portfolio performed worse than the market, three out of his five biggest new positions still outperformed the market. We wouldn’t want to be imitating his 25th “best” investment idea but we believe investors may be able to beat the market over the long term by imitating John Paulson's top stock picks.
