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Hedge Fund Giant John Paulson - Top 5 Holdings: GLD, AU, C, BAC, APC

February 23, 2011 | About:
Charles Cliff

Charles Cliff

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John Alfred Paulson is the founder and president of Paulson & Co., an employee-owned hedge fund headquartered in New York. Paulson graduated first in his class with a bachelor's degree in finance from New York University's College of Business and Public Administration, now the NYU Stern School; he earned his MBA from Harvard Business School. Paulson cut his teeth while working at Boston Consulting Group and then worked under Leon Levy at Odyssey Partners. In 1994, Paulson opened his own investment firm, Paulson & Co. Inc. Paulson & Co. Inc. (PCI) is an employee owned hedge fund sponsor, primarily providing services to pooled investment vehicles. The firm manages separate client-focused portfolios, employing merger arbitrage, long/short, and event-driven strategy to make its investments. Paulson & Co. Inc. utilizes fundamental analysis to make its investments, benchmarking the performance of its investments against the S&P 500 Index. Daily Mail reported that John Paulson’s Paulson & Co returned around 20% in 2010, giving him a personal gain of nearly $1.3 billion. Paulson has produced staggering growth with a three-year compound annual return of 122.92% in 2010. In 2010, the Paulson and Co. funds produced over $8.4 billion of gross gains.

Paulson spreads his investments across both long and short term returns, focusing on event-driven arbitrage. John Paulson summarizes his investment philosophy: “The flexibility of having long and short exposure across the capital structure allows us to optimize performance across market cycles. Our goals are capital preservation, above average returns over the long term, and low correlation to the markets.” As the market recovers from its shortfalls of the past years, Paulson is betting on strong economic growth in the recovery: “it is time to be in the stock market,” he says, and that now is not the time “to be under-invested”.

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Top Five Holdings in 2010 Ticker Percent Composition Number of Shares
SPDR Gold Trust GLD 14.93 31,500,00
Anglogold Ashanti Ltd. AU 6.89 40,949,437.00
Citigroup C 6.68 413,525,641.00
Bank of America BAC 5.64 123,860,951.00
Anadarko Petroleum APC 5.54 21,277,761.00


SPDR Gold Trust (GLD)

SPDR Gold Trust is an investment trust, whose objective if for their shares to reflect the performance of the price of gold bullion. The Trust primarily holds gold. The sponsor of the Trust is World Gold Trust Services, LLC. BNY Mellon Asset Servicing, a division of The Bank of New York Mellon is the trustee of the Trust. HSBC Bank USA, N.A. serves as the custodian of the Trust’s gold.

Although expanding into new markets in 2010 and 2011, Paulson has maintained strong investments in gold. Although the rest of the market has fluctuated severey in the last few years, Paulson backs gold heavily, making it his top two holdings. Essentially, Paulson “thinks inflation will make a comeback within a couple years - and this should bolster gold” (BloggingStocks). Gurufocus rated GLD with the business predictability rank of 1-star.

Anglogold Ashanti Ltd. (AU)

AngloGold Ashanti Limited is a global producer of gold. AngloGold Ashanti has 21 operations and a number of exploration programs in gold-producing regions of the world. Revenue is also derived from the sales of silver, uranium oxide and sulphuric acid. The Company sells its products on international markets.

Their shares trade around $135.41, with a P/E ratio of 26.68 and an EPS of $5.08. In the last quarter of 2010, the Gold Trust had a revenue of $1.42 billion and a net income of $1.06 billion.

One of Paulson’s major strategies over the past years is an investment in gold, keeping his largest holdings in gold trusts like Anglogold. Anglogold CEO, Mark Cutifani, commented on Paulson holdings, claiming his company is “central to his [Paulson’s] gold strategy” (Money Web). In his investments in gold, Paulson has been betting on a resurgence of inflation, and in fact it “is already becoming a problem in emerging economies, especially because of rising commodities prices” (BloggingStocks). Paulson’s bets have been spot on in the recent fincincal crises, could his instincts regarding gold be far off? GuruFocus rated AU with the business predictability rank of 1-star.

Citigroup (C)

Citigroup is a New York based financial services holding company. Citigroup Inc. has the world's largest financial services network. As of December 31, 2009, Citigroup had approximately 200 million customer accounts and did business in more than 140 countries. Citigroup operates through two primary business segments: Citicorp and Citi Holdings.

Their shares trade around $4.91, with a P/E ratio of 14.03 and an EPS of $0.36. In the 3rd quarter of 2010, Citi reported net income of $2.2 billion, marking its third consecutive quarterly operating profit. 3rd quarter net income was down $529 million or 20% from the 2nd quarter. Paulson stand firmly behind the potential of Citigroup, and remarks that Citigroup was the largest source of profit for Paulson & Co. in 2010: “Citigroup demonstrates the upside potential of many of the restructuring investments we have added to our portfolio and our ability to generate above average returns in large positions.” In 2009, Paulson was willing to bet big on Citigroup, investing $1 billion in the financial firm, and again Paulson’s bets have paid off; however, Paulson has trimmed his holding in Citigroup at the end of 2010. Although still a big earner for Paulson & Co, Paulson seems to have decided to diversify away from Citigroup. GuruFocus rated C with the business predictability rank of 1-star.

Bank of America (BAC)

Bank of America Corporation is a bank holding company, and a financial holding company. The company serves individual consumers, small and middle market businesses, large corporations and governments with a range of banking, investing, asset management and other financial and risk management products and services. Bank of America provides a range of banking and nonbanking financial services.

Their shares trade around $14.81, with an EPS of -$0.33. In 2010, Bank of America reported a revenue of $135 billion but a net income of -$3.27 billion. Given these current economic climes, Paulson bet on a heavy turn-around for Bank of America for 2010; however, Bank of America seems to have failed Paulson’s expectations, as he made significant cuts in his holdings: “Bank of America holdings also dropped to 123.9 million shares, from 137.8 million” (Wallstreet Journal). GuruFocus rated BAC with the business predictability rank of 1-star.

Anadarko (APC)

Anadarko Petroleum Corporation (Anadarko) is an independent oil and gas exploration and production company. The Company operates in three operating segments: Oil and gas exploration and production, Midstream and Marketing. The Company owns and operates natural-gas gathering, processing, treating and transportation systems in the United States.

Their shares trade around $81.30, with a P/E ratio of 53.38 and an EPS of $1.52. In 2010, Anadarko reported revenues of $10.84 billion and a net income of $761 million. Pualson has boosted his holdings in the energy sector in 2011, buying “7.8 million shares in Anadarko Petroleum Corp (APC.N), pushing his position in the oil and gas firm to more than 21 million shares” (Reuters). Although maintaining his primary holdings in financial institutions, Paulson has begun moving into the energy sector, which may be ready for a brilliant recovery on 2011. GuruFocus rated APC with the business predictability rank of 1-star.

Click on John Paulson for all of his recent stock picks.

Rating: 2.5/5 (8 votes)

Comments

georgexjg
Georgexjg - 3 years ago


A typical inflation oriented, disaster-expected plus a hope of QE3 portfolio.

American dream.....

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