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John Paulson, the founder of Paulson & Co, is currently one of the most followed money managers. But he was relatively unknown before 2007. In that year, he made $3.5 billion by betting against subprime mortgages. In 2010, he made $5 billion by betting on gold. Paulson’s strength is in macro-themed investments. He picks a group of stocks from each sector in which he invests rather than picking a single or a couple of stocks from a sector. Paulson’s fund did not perform well in 2011. As of September 2011, Paulson’s Advantage Plus Fund is down about 46% through the end of November. Despite the huge loss in 2011 Advantage Plus returned around 19% annually since its inception.

In his latest investor letter Paulson told his investors that he has adjusted his portfolio towards stocks with lower risk profiles and better prospects. He also sold out stocks that didn’t fit the bill. Below is a list of top 10 sells by Paulson during the third quarter.

Company Name

Ticker

Value

COMCAST CORP NEW

CMCSA

514,402

JPMORGAN CHASE & CO

JPM

251,889

SAVVIS INC

SVVS

22,5321

N Y S E EURONEXT

NYX

10,2810

STATE STREET CORP

STT

90,180

B M C SOFTWARE INC

BMC

87,520

TERADATA CORP DE

TDC

87,290

FIRST HORIZON NATIONAL CORP

FHN

73,237

SALIX PHARMACEUTICALS LTD

SLXP

59,745

NETAPP INC

NTAP

51,197

The biggest position sold out by Paulson during the third quarter was Comcast Corp (NASDAQ:CMCSA). Paulson & Co reported to own $514 million worth of CMCSA at the end of June. According to its latest 13F, the fund did not own any shares of the stock at the end of September. Since September 30, CMCSA returned 11.24%, lower than the 11.55% for SPY. Jim Simons also sold out his stakes in CMCSA during the third quarter. Another big position sold out by Paulson was JPMorgan Chase & Co (NYSE:JPM). Paulson’s fund had over $250 million invested in this stock at the end of the second quarter. JPM returned 12.22% so far in the fourth quarter. Paulson also trimmed his positions in Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) by around 30-35%, but he increased his bets on Bank of America (NYSE:BAC) by 6%. His most favorite financial stock is Capital One (NYSE:COF) though. In his investor letter Paulson said COF has high capital levels, strong operating earnings, and high reserves.

The worst performing stock on the list above is BMC Software Inc (NASDAQ:BMC). It lost 9.54% so far since the end of September, during which the market was up 11.55%. Paulson & Co had had $87.5 million invested in this position at the end of second quarter. Another stock that generated negative returns so far in the fourth quarter is Teradata Corp (NYSE:TDC), which lost 0.24% since the end of September. Again, Paulson successfully avoided suffering losses in this position. He sold out his $87 million position in TDC over the third quarter. George Soros and Jim Simons also sold out their stakes in TDC in the third quarter.

Other big positions sold out by Paulson include NYSE Euronext (NYSE:NYX), State Street Corp (NYSE:STT), First Horizon National Corp (NYSE:FHN), Salix Pharmaceuticals Ltd (NASDAQ:SLXP), and Netapp Inc (NASDAQ:NTAP). We recommend investors to be cautious about the stocks that Paulson sold recently. He seems to have a terrible track record this year but most of it is because of his huge bets on financials. Gold and gold ETF (NYSEARCA:GLD) are still the largest positions in Paulson’s fund and most of his personal wealth is tied to the performance of his gold-denominated funds. We think his portfolio is positioned to benefit from the resolution of Europe’s debt crisis.

Disclosure: I am long C, SPY.

Source: 10 Big Sells By Billionaire John Paulson