Billionaire John Paulson’s Latest Stock Picks

One of the most revered names in the business, billionaire hedge fund manager John Paulson is famous for his lucrative bets against subprime mortgages in the mid-2000s. Paulson earned a $4.9 billion payout in 2010, breaking records in the hedge fund industry. Lately, however, Paulson has had to convince investors that his fund is still on the straight and narrow path—his major funds posted double-digit losses over the past year and change. The fund’s economic outlook in 2011 was rather sunny, costing the fund billions as it took on significant amounts of risk in its investments.

largest hedge funds in the worldWe will take a look here at how Paulson’s major stock picks, as disclosed in Paulson & Co.’s 13F regulatory filing, compare to his past filings, particularly looking at major up and down movements in the portfolio.

Gold is still king. John Paulson continues to load quite a bit of his portfolio with gold-related equities. His SPDR Gold Trust (NYSEARCA:GLD) is valued at $3.7 billion dollars, or about a quarter of the total value of his 13F portfolio. But that’s not all: the top equity holding in the portfolio remains AngloGold Ashanti Limited (NYSE:AU), which, along with convertible bond issues, totals slightly over $1 billion. We explained that, in the wake of the third round of quantitative easing (QE3), gold and a variety of different commodities make ideal hedges against currency debasement and inflation. Essentially, Paulson has put his chips down on a gold ETF and a gold production company—two ways to play gold that have underperformed buying physical gold since the beginning of the year. AngloGold is down 35 percent year-over-year, and we note that it derives its revenue not only from gold but also from silver, sulfuric acid, and uranium production. The company produced about 4.3 million ounces of gold in 2011, and though its performance has not been inspiring over the past year, we are more optimistic about demand levels for gold going forward as gold becomes a more common monetary reserve asset.

More lightweight on Hartford and Delphi. Paulson’s fund decreased its holdings in Delphi Automotive PLC (NYSE:DLPH), which Paulson initiated as a top 5 holding in the fourth quarter 2011. Since the beginning of 2012, shares of the company are up 47 percent. The company issued a positive third-quarter earnings report of 84 cents per share, up from 79 cents from a year ago. This comes, however, as top line growth is starting to pressure earnings (revenue fell 6 percent) and as the company begins significant strategic readjustments in the slow European markets, so Paulson’s move to take profits here makes sense. Paulson still has a significant stake in the company, though, and other optimists like billionaire hedge fund manager Steven Cohen are also keen on Delphi and the automotive industry generally, as we noted in a previous article.

Paulson also cashed in nearly 12 million shares of Hartford Financial Services Group Inc (NYSE:HIG), a major insurance provider for individuals and businesses in the United States. With shares of the company up about 26 percent year-to-date, we also see a rationale for profit-taking in this still sizable holding. However, Hartford still looks like a good value play according to historical valuations. Shares are trading at about 6 times forward consensus earnings estimates, which is well below the 10-year range of 7 to 28. Shares are trading at their lowest valuations on a P/E basis since 2002. If you add in a successful reconstruction—which is already well underway—we could see a significant bump in Hartford shares.

More heavyweight in technology. Paulson’s portfolio has beefed up some of its top 10 technology holdings. Particularly, his holdings of Life Technologies Corp. (NASDAQ:LIFE) have increased to 13.5 million shares valued at a total $660 million. Another mid-cap like Delphi, Hartford, and AngloGold Ashanti, Life Technologies Corp. produces a number of specialty products for use the life sciences and life science research. Up 18 percent year-to-date, shares are still only trading at 11 times forward consensus earnings, and Paulson likely sees several catalysts for growth. The company stands to make considerable headway in genomics and molecular diagnostics markets, though, as S&P notes, its next-generation sequencing platform SOLiD sells a significantly higher price point than that of many of its major competitors. Illumina, Inc. (NASDAQ:ILMN) is also expected to come out with a sequencing platform by year’s end, adding to competition in this area—a source of caution for investors.

Computer and internet technology firm Equinix Inc (NASDAQ:EQIX) also received a significant boost in Paulson’s portfolio for the third quarter; Paulson doubled his stake. Having peaked at the end of September, shares of the company have since retreated slightly to around $170 per share. Tech hedge fund guru Philippe Laffont remarked that Equinix Inc has the equivalent of “beach-front property” in the worldwide internet infrastructure (view Laffont’s portfolio here). The recent dip in the company’s shares might be an opportunity to take advantage of the secular growth in internet infrastructure services and solutions.

In the rough waters ahead for the stock market—the fiscal cliff, wavering European and U.S. economies, and mixed earnings reports—John Paulson is definitely a person to keep an eye on amidst the choppy waves. Despite his funds’ mediocre performance over the past two years, we could yet see the same virtuosity that led Paulson’s funds to record returns from 2007 to 2010.

Disclosures: Nothing to report.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!