Billionaire Paulson’s Picks Killed the Market in Q1: Healthcare Stocks Pave the Road to Success

Excluding its ETF holdings, DIRECTV (NASDAQ:DTV) ranked as the third-largest position in Paulson’s equity portfolio last quarter, with 11.40 million shares valued at around $988.38 million. During the fourth quarter, the investment firm increased its exposure to the stock by acquiring an additional 1.0 million shares. Despite the fund’s bullish stance towards the company, the stock lost 1.85% since the beginning of the year. Furthermore, AT&T Inc. (NYSE:T) is set to complete its acquisition of DIRECTV (NASDAQ:DTV) over the next few weeks, as negotiations near their end. The deal faces little opposition from shareholders despite AT&T’s offer of $91.61 per share being somewhat of a discount deal now, compared to the $95.00 initial price tag as AT&T shares have slid by nearly 5% since the acquisition, which pays out to shareholders in cash and AT&T stock, was first announced. While Paulson has been betting on this merger play for some time now, several other investment firms also hold a significant stake in the company. Warren Buffett’s mutual fund Berkshire Hathaway for example disclosed ownership of 31.35 million shares last quarter, accounting for roughly 2.5% of its equity portfolio.

Tracking the activity of hedge funds such as Paulson & Co is vital when trying to seek out new investment opportunities for small investors. However, simply imitating the moves made by these firms does not guarantee great returns, since most of their top picks are in large-cap stocks. These equities usually don’t beat the market by a large margin, as they are often already efficiently priced. Hence, we have concentrated our efforts on gathering and analyzing information regarding the small-cap picks of more than 700 hedge funds, which resulted in a small-cap strategy that returned 132% over the past 2.5 years, and beat the S&P 500 ETF (SPY) by nearly 80 percentage points.

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