John Paulson, the subject of Gregory Zuckerman’s recently published book, “The Greatest Trade Ever” (see my recent review of the book) posted his new 13F filing on Friday. The 13F filing is the listing of all of the firm’s stocks that it owns as of the most recent quarter-end. I’ve traded very successfully for hedge funds based on the idea of buying positions that the super-investors own - but, ideally, at discounts to where they bought their positions.
It’s important to point out that Paulson not only guessed way in advance that the housing boom was going to completely implode but he invested billions of dollars on that thesis despite the fact that most of the investment community was laughing at him — including me, I might add (and as mentioned in Greg Zuckerman’s book). I met with his firm but declined to invest in the Paulson Fund despite the enormous evidence it presented that the housing bubble was about to go bust.
Should I make the mistake again? Or follow the new positions listed in the recent filing?
Paulson’s newest position is in Citigroup, the largest bank on the planet. A few months ago, Citigroup share price had fallen to less than a dollar when investors were making the bet that the bank was insolvent. He bought 300 million shares in the last quarter. That’s not chump change even though the stock, at $4.05 as of the close Friday, is more than 90% off of its June 2007 high of $54.75. This is not a standalone bet but part of a broader bet on the return of the banking industry. For instance, he also started a new position in JP Morgan. He sold his 2 million-share stake in Goldman Sachs but I don’t think this is a bet against the broker-dealer model but more of a reflection that he’s probably taking profits on significant gains and reallocating into the banks that haven’t moved as fast as Goldman.
New positions in Cemex (a bet that the housing industry is coming back, not to mention infrastructure build-up triggered by the stimulus package) and Starwood Hotels, Starwood Property Trust, Ashford Hospitality Trust, and Felcor Lodging Trust. (all bets on real estate and the hotel industry) all reflect bets that Paulson thinks the worst is behind us and the economy is going to roar back.
With a roaring economy and money flooding the system, one thing worth being wary about is a weakening dollar. Paulson’s largest position: GLD, the ETF that tracks the price of gold.
I’ve made the mistake once before not to bet on Paulson. I’m probably not going to do it again.
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