John Paulson’s Paulson & Co recently reduced its position in American Capital, Ltd. (ACAS). Paulson & Co was ACAS’ insider and the largest hedge fund shareholder in the second quarter. The firm had 43.73 million shares of ACAS in its portfolio at the end of June. ACAS had a good performance in the first half of 2011. But the stock slumped in the third quarter and has realized a loss of 14% year to date. According to the Form 4 filing on October 4th, John Paulson began his disposal on September 27th right after the stock dropped below its January’s price level. He made 11 insider sales towards ACAS as the stock went all the way down. The selling price ranged from $7.74 to $6.11. After the transactions, Paulson & Co now has 2.14 million shares remaining in his portfolio.
Beside John Paulson’s Paulson & Co, in total eighteen hedge funds had ACAS in their portfolios in the second quarter. Michael Novogratz’s Fortress Investment Group had a smaller position, with 13.40 million shares after a 15% increase. SAC Capital’s subsidiary Sigma Capital Management had 2.92 million shares, and Steven Cohen’s SAC Capital Advisors had 1.97 million shares.
Paulson & Co was started in 1994 by John Paulson, who became famous for his bets against subprime mortgages. Before that he was relatively unknown and pursuing a merger arbitrage strategy with mediocre returns. In 2010, he made $5 Billion by betting on gold. John Paulson is not a great stock picker. His strength is in macro-themed investments. He doesn’t pick a single or a couple of stocks from a sector. He picks a bunch of stocks from each sector in which he invests.
American Capital, Ltd. is a private equity and venture capital firm in the Asset Management Industry. According to Yahoo! Finance, the firm is “specializing in management and employee buyouts, mezzanine, acquisition, recapitalization, middle market, and growth capital investments”. It also invests in special situations and in government.