John Paulson founded Paulson & Co in 1994. He graduated first in his class and received his bachelor's degree in finance from New York University. He has also an MBA from Harvard Business School. Paulson became famous for his bets against subprime mortgages. In 2010, he made $5 Billion by betting on gold.
We believe that by imitating the stock picks of the smartest investors, such as Paulson as well as other insiders, investors are more likely to beat the market. Below we compiled a list of stocks both Paulson and insiders love. At least two insiders purchased these stocks since March. The Insiders Column shows the number of unique insiders purchasing since the beginning of March.
Company | Ticker | Value (x1000) | Activity | Insiders |
WELLS FARGO | 942,816 | 64% | 2 | |
M G M RESORTS Class 1 | 550,857 | -5% | 2 | |
AMERICAN CAPITAL | 434,189 | 0% | 2 | |
ALPHA NATURAL RES | 154,416 | -72% | 2 | |
M G M RESORTS Class 2 | 83,353 | New | 2 | |
FIRST HORIZON | 73,237 | 0% | 2 | |
BOISE INC | 62,320 | 0% | 2 | |
RLJ LODGING | 47,768 | New | 2 | |
QUAD GRAPHICS | 41,852 | 0% | 2 | |
STATE BANK FINL | 38,060 | New | 2 | |
MYLAN INC | 368,570 | -44% | 3 | |
WHIRLPOOL CORP | 203,300 | -15% | 3 | |
MEDTRONIC INC | 187,834 | -48% | 3 | |
POPULAR INC | 184,920 | 0% | 3 | |
N Y S E EURONEXT | 102,810 | New | 3 | |
SUNTRUST BANKS | 829,065 | -6% | 4 | |
LIFE TECHNOLOGIES | 391,566 | New | 4 | |
C N O FINANCIAL | 193,439 | 0% | 4 | |
HOWARD HUGHES | 120,324 | -16% | 4 | |
REGIONS FINANCIAL | 119,931 | 0% | 4 | |
STRATEGIC HOTELS | 56,640 | 0% | 4 | |
ASHFORD HOSPITALITY | 37,350 | 0% | 4 | |
SUNSTONE HOTEL INV | 34,299 | -26% | 4 | |
JPMORGAN Class 1 | 251,889 | 0% | 6 | |
JPMORGAN Class 2 | 192,418 | -6% | 6 | |
FELCOR LODGING | 30,381 | 0% | 7 | |
WALTER ENERGY | 115,800 | New | 8 |
Two largest positions in Paulson’s hedge fund purchased by at least two insiders since March are Wells Fargo and SunTrust Banks Inc. Wells Fargo is a diversified financial services company while SunTrust is a commercial banking organization. Two insiders purchased WFC and STI was purchased by four different insiders. WFC lost 12.92% since the end of June, and STI lost 25.53%. Both stocks underperformed the market as SPY lost 8.36% during the same period. Paulson increased his position in WFC by 64% during the second quarter, but he decreased his position in STI by 6%, which minimized his loss to a certain degree. Warren Buffett also invested over $9 billion in WFC (check out Buffett’s top stock picks).
During the second quarter, Paulson initiated a brand new $392 million position in Life Technologies Corp. The stock was also purchased by four insiders since March. Life Technologies is a global life sciences company. It has a market cap of 7.18B and a P/E ratio of 20.46. LIFE lost 23.56% since the end of June. Insiders paid as little as $36 for LIFE shares which closed above $52 at the end of June. Larry Robbins invested $665 million in LIFE shares.
Walter Energy Inc. was purchased by eight insiders since March. It was the stock with the most insider purchases. Walter Energy is a producer and exporter of metallurgical coal for the global steel industry and also produces steam coal, coal bed methane gas (natural gas), metallurgical coke and other related products. It has a market cap of 4.89B and a P/E ratio of 10.36. WLT lost 31.15% since the end of June. Glenn Russell Dubin invested $178 million in WLT shares. Insiders paid as little as $71 for WLT which closed at $115 per share on June 30th. Most insider purchases in WLT occurred after the huge drop in price.
Bank of America Corp (BAC) was not on the list above because it was purchased by only one insider since March. Normally we would have expected it to have more purchases given the huge decline in BAC’s stock price. This signals us that BAC may not be a great investment at the moment. Paulson invested $800+ million in BAC shares at the end of the second quarter. He slightly reduced his position in the stock by around 50% during the second quarter. Bank of America was recently reported to cut 30,000 jobs as part of a restructuring plan. It has a market cap of 70.46B and lost 36.16% since the end of June. Bruce Berkowitz had over $1 billion invested in BAC shares (check out Berkowitz’s top stock picks).
We like Paulson. Though some of the stocks he held at the end of June underperformed the market in the recent three months, his experience is invaluable to running a hedge fund. We believe that by following his top stock picks and being aware of the insiders’ move, investors are able to beat the market in the long run.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
