A Look At John Paulson's Top 10 Holdings

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Includes: APC, AU, BRK.A, C, COF, HIG, HPQ, RIG, STI, WFC
by: The Analyst Hub

John Paulson is the founder and president of Paulson & Co., a New York-based hedge fund with $30 billion in assets under management. He is famous for his bet against subprime mortgages in the last downturn. The billionaire businessman earned $3.7 billion in 2008 by shorting mortgage-backed securities. More recently in 2010, he made $4.9 billion from his portfolio. His fund is not doing too well in 2011, but it is still worth looking at his latest stock picks given his success in directional bets in the recent past.

The following is a list of top holdings of Paulson & Co.:

Stock

Symbol

Shares Held - 06/30/2011

% of Portfolio

Change in shares

Anglogold Ashanti Ltd.

AU

39935382

6.14

-1111592

Citigroup, Inc.

C

33505002

5.1

-379217198

Anadarko Petroleum Corporation

APC

16712188

4.69

-4521697

Transocean Ltd.

RIG

18810000

4.44

-5657500

Capital One Financial Corp.

COF

21100000

3.98

3100000

Hartford Financial Services Group Inc.

HIG

40518454

3.9

-3402246

Wells Fargo & Company

WFC

33600000

3.44

13100000

Hewlett-Packard Company

HPQ

23500000

3.13

-1500000

Suntrust Banks, Inc.

STI

32134301

3.03

-2156341

Lubrizol Corporation

LZ

5460342

2.68

-539658

Click to enlarge

Source: 13F filing

My favourite among above stocks is Capital One Financial Corporation. Capital One Financial is a diversified financial services holding company. The company and its subsidiaries offer a range of financial products and services to consumers, small businesses and commercial clients through branches, the Internet and other distribution channels. It operates in three business segments: Credit Card, Consumer Banking and Commercial Banking. Capital One's EPS forecast for the current year is $7.42 and next year is $5.97. According to consensus estimates, its top line is expected to grow 0.50% in the current year and 8.00% next year.

Capital One’s share price has declined along with the broader stock markets. However, if we keep macro picture aside, fundamentals have actually improved for the company in past couple of months. The company has announced two opportunistic acquisitions of ING Direct and US card business of HSBC (HBC) on very attractive and EPS accretive terms. Several sell side analysts have raised their estimates and upgraded the stock in last one month. Trading at less than 7x forward consensus earnings, I believe stock is a very good buy compared with other large financial institutions given its transparent business model which should appeal to investors in this volatile market.

For other stocks in the above list, here are some of the specifics, including a brief description of their businesses and growth expectations (top line and bottom line):

AngloGold Ashanti Limited is a mining company. AngloGold Ashanti has 20 operations consisting of open-pit and underground mines and surface metallurgical plants in 10 countries on four continents. Ashanti’s main product is gold. The Company’s revenue is primarily derived from the sale of gold and also uranium, silver and sulfuric acid. AngloGold Ashanti's EPS forecast for the current year is $3.53 and next year is $4.77. According to consensus estimates, its top line is expected to grow 26.20% in the current year and grow 12.50% next year.

Citigroup Inc. is a global diversified financial services holding company. Citigroup businesses provide consumers, corporations, governments and institutions with a range of financial products and services. Citigroup's EPS forecast for the current year is $3.99 and next year is $4.95. According to consensus estimates, its top line is expected to decline 7.70% in the current year and grow 4.50% next year.

Anadarko Petroleum Corporation is an independent oil and natural gas exploration and production company. As of December 31, 2010, it had 2.4 billion barrels of oil equivalent of proved reserves. Anadarko’s portfolio of assets includes positions in onshore resource plays in the Rocky Mountains region, the southern United States and the Appalachian basin. Anadarko operates in three operating segments: oil and gas exploration and production, midstream, and marketing. Anadarko's EPS forecast for the current year is $3.44 and next year is $4.05. According to consensus estimates, its top line is expected to grow 24.90% in the current year and grow 13.00% next year.

Transocean Ltd. is an international provider of offshore contract drilling services for oil and gas wells. The Company operates in two segments: contract drilling services and other operations. Contract drilling services, the Company’s primary business, includes contracting Transocean’s mobile offshore drilling fleet, related equipment and work crews primarily on a day rate basis to drill oil and gas wells. Its other operations segment includes drilling management services, and oil and gas properties. Transocean's EPS forecast for the current year is $3.50 and next year is $5.89. According to consensus estimates, its top line is expected to decline 1.70% in the current year and grow 12.30% next year.

The Hartford Financial Services Group, Inc. is an insurance and financial services company. The Company maintains a retail mutual fund operation, whereby the Company, through wholly-owned subsidiaries, provides investment management and administrative services to The Hartford Mutual Funds, Inc. and The Hartford Mutual Funds II, Inc., consisting of 52 mutual funds, as of December 31, 2010. Hartford's EPS forecast for the current year is $2.86 and next year is $3.85. According to consensus estimates, its top line is expected to grow 141% in the current year and decline 0.60% next year.

Wells Fargo & Company is a diversified financial services company. The Company provides banking, insurance, investments, mortgage banking, investment banking, retail banking, brokerage, and consumer finance through banking stores, the Internet and other distribution channels to consumers, businesses and institutions in 50 states, the District of Columbia, and in other countries. The Company operates in three segments: Community Banking, Wholesale Banking, and Wealth, Brokerage and Retirement. Wells' EPS forecast for the current year is $2.81 and next year is $3.35. According to consensus estimates, its top line is expected to decline 4.60% in the current year and grow 1.10% next year.

Hewlett-Packard Company is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. Its operations are organized into seven segments: Services, Enterprise Storage and Servers, HP Software, the Personal Systems Group, the Imaging and Printing Group, HP Financial Services, and Corporate Investments. Services, ESS and HP Software are reported collectively as a broader HP Enterprise Business. Hewlett-Packard's EPS forecast for the current year is $4.84 and next year is $4.78. According to consensus estimates, its top line is expected to grow 1.00% in the current year and remain flat next year.

SunTrust Banks, Inc. is a commercial banking organization. The Company is a diversified financial services holding company whose businesses provide a range of financial services to consumer and corporate clients. Through its principal subsidiary, SunTrust Bank, the Company provides deposit, credit, and trust and investment services. SunTrust's EPS forecast for the current year is $1.12 and next year is $2.24. According to consensus estimates, its top line is expected to decline 1.30% in the current year and grow 2.10% next year.

The Lubrizol Corporation is a specialty chemical company. The Company supplies technologies and produces additives, ingredients, resins and compounds. Its products are used in a range of applications and are sold into markets such as those for engine oils, specialty driveline lubricants and metalworking fluids, as well as markets such as those for personal care and over-the-counter pharmaceutical products, performance coatings, medical products and compressor lubricants. Berkshire Hathway (BRK.A) recently completed acquisition of Lubrizol.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.