John Paulson, the billionaire hedge fund manager of Paulson & Co., is well known for betting against subprime mortgages before they collapsed, and buying banks after their collapse. Last year, Paulson earned a record amount of money for managing a hedge fund on the back of large bets on gold and some of those banks. So far in 2011, though, Paulson & Co.’s funds have had their issues, including the generally poor performance of the financial sector and the negative news that the hedge fund was a large investor in Sino Forest, a Chinese timber and wood company that has come under scrutiny due to accusations of fraud.
On Monday, November 14, 2011, Paulson & Co. filed its 13F, listing the transactions the hedge fund made during the third quarter. According to the filing, Paulson’s largest new purchase was to Motorola Mobility Holdings (MMI), buying nine million shares of the company, valued at about $340 million at the end of the third quarter. Google (GOOG) is currently acquiring MMI, and it appears that this purchase is an example of merger arbitrage.
Other large new purchases by Paulson & Co. include Nalco Holding Co (NLC), buying about 9.17 million shares worth about $320 million, and News Corp (NWS), buying 14.7 million shares worth over $229 million. Paulson also purchased about $160 million worth of AMC Networks (AMCX) and $140 million worth of Interdigital (IDCC), both being new positions for the hedge fund.
Paulson also had some notable sales during the third quarter, including selling the hedge fund’s entire position in Comcast (CMCSA), valued at over $500 million. The fund also sold out of its 1.6 million-share position in BMC Software (BMC), valued at about $87.5 million.
Paulson & Co. also sold out of several financials, including selling all of its holdings in JPMorgan Chase (JPM), valued at about $192 million, NYSE Euronext (NYX), valued at about $103 million and State Street (STT), valued at about $90 million at the end of the third quarter.
Paulson’s significant position decreases included his significant holding in the SPDR Gold Trust ETF (GLD), selling about 11.2 million shares of the ETF. Though the hedge fund sold over $1 billion worth of this gold ETF, it still owns over $2 billion.
Paulson’s gold liquidation may have been due to the need to raise cash due to fund outflows that may have spiked over the last several months due to market volatility and concerns over Paulson’s heavy exposure to financials and gold, as well as its Sino Forest investment. Paulson may have also wanted to realize some gains on his largest investment. Nonetheless, Paulson & Co. has held onto more gold than it sold, and the fund continues to acquire some miners.
Paulson & Co. increased its holdings in several gold mines, including Rangold (GOLD), Agnico-Eagle (AEM) and Iamgold (IAG). Nonetheless, Paulson reduced its exposure to Anglogold Ashanti (AU), selling about 3.2 million shares its second largest holding behind GLD.
The hedge fund also reduced its positions in financials such as Capital One Financial (COF), Citigroup (C), Hartford Financial (HIG), Wells Fargo (WFC) and Suntrust Banks (STI), though these financials are all still in Paulson & Co.’s top ten holdings. Paulson appears to be sticking to his gold and financial bets, which indicates the hedge fund continues to expect inflation to increase.
Disclaimer: This article is intended to be informative, and should not be construed as personalized advice, as it does not take into account your specific situation or objectives.