2016 was unarguably one of the worst years for John Paulson‘s Paulson & Co. since its inception in 1994. According to a recent report by hedge-fund investor LCH Investments NV, the New York-based hedge fund that gained immense fame from its ‘Big Short’ on subprime securities in 2007-08 and became one of the largest and most famous hedge funds in the world post that, lost $3 billion of investors’ money in 2016.
Whether looked collectively or in isolation, the $3 billion figure is a significant amount to be lost by a firm in a single year. As a matter of fact, the chiefs of most publicly listed companies would have been forced to resign from their positions if they post such a large loss in a single year. Nevertheless, Mr. Paulson is known for bouncing back from lows quite fast and having the appetite to digest heavy losses for a long time, something that he proved quite successfully while holding on to his housing shorts before the financial crisis erupted.
This time too, he has been holding on to his core equity positions at the end of 2016 as revealed by Paulson & Co.’s recent 13F filing. The fund reduced its stake in most of its major holdings during the fourth quarter, which contributed to the value of its US long equity portfolio sliding by $1.29 billion to $7.93 billion at the end of December. However, the fund’s top-five stock picks remained the same over the quarter. In aggregate, these top-five holdings alone accounted for over 43% of the fund’s equity portfolio value, as of December 31. In the rest of this post, we will take a look at the five major changes Paulson & Co. made in its portfolio during the fourth quarter.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs. Insider Monkey’s enhanced small-cap strategy registered gains of more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points in the last 4.5 years (see the details here).
International Seaways Inc (NYSE:INSW)
– Shares Held By Paulson & Co. (as of December 31): 3.68 Million
– Value of The Holding (as of December 31): $51.68 Million
International Seaways Inc (NYSE:INSW) was a new entrant in Paulson & Co.’s equity portfolio during the fourth quarter. The company became a separate publicly-traded entity in November last year after it was spun off from Overseas Shipholding Group (NYSE:OSG). Since then, International Seaways Inc (NYSE:INSW)’s stock has appreciated significantly and is currently trading up by 31.77% year-to-date. Despite this rally, analysts who have started tracking the stock argue that it’s trading at a considerable discount to its peers. International Seaways is currently trading at a EV/EBITDA multiple of around 4.4 times its fiscal 2016 numbers, while other tanker operating companies are trading at 5.5 to 7.5 multiples.