Wall Street Journal reporter Gregory Zuckerman is the author for book The Greatest Trade Ever
about John Paulson and expert of Paulson & Company published an article today in WSJ entitled ’Greatest Trade’: How You Can Make $20 Billion.
The amount $20 billion refers to the money John Paulson made during the housing and credit crisis in the last three years. How did he do it? According to Gregory Zuckeman:
Here are 8 lessons Zuckeman advocates in his article so that the rest of us can make our $20 billion:
Where is John Paulson investing his money? Here are the top holdings of his portfolio as of September 30, 2009:
No. 1: Spider Gold Shares (GLD, Financial), Weightings: 15.22% - 31,500,000 Shares
Paulson has invested in this Gold related ETF since the first of this year. GLD share has climbed 30% since the beginning of this year.
No. 2: Bank of America Corp. (BAC, Financial), Weightings: 13.21% - 159,794,229 Shares
Bank of America Corp. is one of the world's leading financial services companies. Bank of America provides individuals, small businesses and commercial, corporate and institutional clients across the United States and around the world new and better ways to manage their financial lives. The company enables customers to do their banking and investing whenever, wherever and however they choose. Bank Of America Corp. has a market cap of $136.44 billion; its shares were traded at around $15.77 with a P/E ratio of 105.1 and P/S ratio of 1.9. The dividend yield of Bank Of America Corp. stocks is 0.3%. Bank Of America Corp. had an annual average earning growth of 7.5% over the past 10 years.
In the quarterly report to shareholders, Paulson said that he thinks the stock may almost double by 2011.
Watch the video below:
No. 3: Wyeth (WYE), Weightings: 12.27% - 51,694,300 Shares
Paulson had 51.7 million shares of Wyeth. In the middle of October, Wyeth became part of Pfizer (PFE). Paulson is a well known expert in risk arbitrage, so he could have shorted Pfizer. After the merger, he may or may not have any shares in the new company.
No. 4: AngloGold Ashanti Ltd. (AU, Financial), Weightings: 8.54% - 42,849,864 Shares
AngloGold Limited is the largest gold producer at 7 million ounces a year, with reserves of 126 m oz. The company has operations in six countries on three continents, some of which are joint ventures, as well as exploration activities in ten countries. AngloGold can be financially characterized by high cash generation, substantial reinvestment in long-term growth and the payment of significant dividends. The company distinguishes itself from its producer peer group through its active involvement in the development of the gold market, particularly in Asia. Anglogold Ashanti Ltd. has a market cap of $12.79 billion; its shares were traded at around $45.51 with a P/E ratio of 40 and P/S ratio of 3.5. The dividend yield of Anglogold Ashanti Ltd. stocks is 0.3%.
No. 5: ScheringPlough Corp. (SGP), Weightings: 7.95% - 57,621,600 Shares.
SGP was acquired by Merck in early November. Same story here as in the case for Wyeth: this is a risk arbitrage trade for Paulson, after the merger, he may or may not have the stock any longer.
No. 6: Citigroup Inc. (C, Financial), Weightings: 7.1% - 300,000,000 Shares
Citigroup Inc., the leading global financial services company, has some two hundred million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Major brand names under Citigroup's trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney, and Banamex. Citigroup Inc. has a market cap of $96.94 billion; its shares were traded at around $4.24 with and P/S ratio of 1.8. Citigroup Inc. had an annual average earning growth of 5.1% over the past 10 years.
Conclusion:
Paulson’s top six holdings can be divided into three groups: two for risk arbitrage, two for gold, and two financials.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and John Paulson for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
Also check out:
about John Paulson and expert of Paulson & Company published an article today in WSJ entitled ’Greatest Trade’: How You Can Make $20 Billion.The amount $20 billion refers to the money John Paulson made during the housing and credit crisis in the last three years. How did he do it? According to Gregory Zuckeman:
Believing that a housing-market collapse was coming, Mr. Paulson spent over $1 billion in 2006 to buy insurance on what he then saw as risky mortgage investments. When the housing market cracked and the mortgages tumbled, the value of Mr. Paulson's insurance soared. One of his funds rose more than 500% that year. Then in 2008, he shorted financial shares, or wagered that they would fall in price, profiting again when these companies collapsed..
Here are 8 lessons Zuckeman advocates in his article so that the rest of us can make our $20 billion:
1. Don't Rely on the Experts
Lesson: When Wall Street is wheeling out its latest can't-miss product, be skeptical.
2. Bubble Trouble
Lesson: Have an exit strategy -- and cash to cushion any tumble.
3. Focus on Debt Markets
Lesson: Debt markets can do a better job predicting problems than stock markets.
4. Master New Investments
Lesson: Educate yourself about the range of exchange-traded funds being introduced, some of which can play a valuable role in a portfolio.
5. Insurance Pays
Lesson: Don't underestimate the value of a safety net, such as put options.
6. Experience Counts
Lesson: A historical perspective can be a valuable tool.
7. Don't Fall in Love
Lesson: Even the greatest trade doesn't last forever.
8. Luck Helps
Lesson: Don't risk too much in any one trade, even one that seems like a sure thing.
Where is John Paulson investing his money? Here are the top holdings of his portfolio as of September 30, 2009:
No. 1: Spider Gold Shares (GLD, Financial), Weightings: 15.22% - 31,500,000 Shares
Paulson has invested in this Gold related ETF since the first of this year. GLD share has climbed 30% since the beginning of this year.
No. 2: Bank of America Corp. (BAC, Financial), Weightings: 13.21% - 159,794,229 Shares
Bank of America Corp. is one of the world's leading financial services companies. Bank of America provides individuals, small businesses and commercial, corporate and institutional clients across the United States and around the world new and better ways to manage their financial lives. The company enables customers to do their banking and investing whenever, wherever and however they choose. Bank Of America Corp. has a market cap of $136.44 billion; its shares were traded at around $15.77 with a P/E ratio of 105.1 and P/S ratio of 1.9. The dividend yield of Bank Of America Corp. stocks is 0.3%. Bank Of America Corp. had an annual average earning growth of 7.5% over the past 10 years.
In the quarterly report to shareholders, Paulson said that he thinks the stock may almost double by 2011.
Watch the video below:
No. 3: Wyeth (WYE), Weightings: 12.27% - 51,694,300 Shares
Paulson had 51.7 million shares of Wyeth. In the middle of October, Wyeth became part of Pfizer (PFE). Paulson is a well known expert in risk arbitrage, so he could have shorted Pfizer. After the merger, he may or may not have any shares in the new company.
No. 4: AngloGold Ashanti Ltd. (AU, Financial), Weightings: 8.54% - 42,849,864 Shares
AngloGold Limited is the largest gold producer at 7 million ounces a year, with reserves of 126 m oz. The company has operations in six countries on three continents, some of which are joint ventures, as well as exploration activities in ten countries. AngloGold can be financially characterized by high cash generation, substantial reinvestment in long-term growth and the payment of significant dividends. The company distinguishes itself from its producer peer group through its active involvement in the development of the gold market, particularly in Asia. Anglogold Ashanti Ltd. has a market cap of $12.79 billion; its shares were traded at around $45.51 with a P/E ratio of 40 and P/S ratio of 3.5. The dividend yield of Anglogold Ashanti Ltd. stocks is 0.3%.
No. 5: ScheringPlough Corp. (SGP), Weightings: 7.95% - 57,621,600 Shares.
SGP was acquired by Merck in early November. Same story here as in the case for Wyeth: this is a risk arbitrage trade for Paulson, after the merger, he may or may not have the stock any longer.
No. 6: Citigroup Inc. (C, Financial), Weightings: 7.1% - 300,000,000 Shares
Citigroup Inc., the leading global financial services company, has some two hundred million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Major brand names under Citigroup's trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney, and Banamex. Citigroup Inc. has a market cap of $96.94 billion; its shares were traded at around $4.24 with and P/S ratio of 1.8. Citigroup Inc. had an annual average earning growth of 5.1% over the past 10 years.
Conclusion:
Paulson’s top six holdings can be divided into three groups: two for risk arbitrage, two for gold, and two financials.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and John Paulson for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
Also check out:
