Every quarter, many fund managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at investing giant John Paulson. Founded in 1994, Paulson & Co. has grown into one of the largest hedge fund companies in the world.
Is Paulson really worth paying attention to, though? Very much so. According to the folks at GuruFocus.com, Paulson gained about 250% in the first decade of this century, compared with just 16% for the S&P 500. That certainly gets my attention, although his 2011 performance was a big letdown.
Paulson's latest quarterly 13F filing shows that as of Dec. 31, 2011, his top holdings, making up roughly 30% of his portfolio, were the gold ETF SDPR Gold Shares, AngloGold Ashanti, and Delphi Automotive (NYSE: DLPH ) . Overall, the portfolio was valued at $13.9 billion, with 84 holdings.
So what else does Paulson's filing tell us? Here are a few interesting details:
His third-largest holding, Delphi Automotive, is also a brand-new one. The company emerged from bankruptcy protection not too long ago and is doing business in a different way now. It's using more foreign labor (thereby cutting costs) and looking to do more business in emerging markets (which offer the chance of faster growth).
Paulson upped his stake in gold miner NovaGold Resources (AMEX: NG ) by 13%. The company has been selling off various assets recently in order to focus its operations more. It's also issuing more shares -- several hundred million dollars' worth -- which has some investors disappointed because of the dilution of existing shares. (The new shares are estimated to represent about 15% of existing shares.) Some are interested in NovaGold because they see it as a possible acquisition target.
A company Paulson sold out of entirely was major coal miner Alpha Natural Resources (NYSE: ANR ) . Some might lose faith in the future of coal because of the low price of natural gas these days, but that can change, and in the developing world, coal is expected to remain in demand. Alpha is also a major metallurgical coal producer, and it will prosper as demand for steel grows.
Two stocks that Paulson reduced his stake in over the past quarter are InterDigital (Nasdaq: IDCC ) and Transocean (NYSE: RIG ) . Many people have been avoiding Transocean because of its uncertain fate regarding its involvement in the Gulf oil spill. It also posted very disappointing earnings in November, sending shares down sharply. (Of course, some see its lowered price as representing a bargain, especially considering its order backlog.) Meanwhile, wireless connectivity specialist InterDigital has disillusioned some investors with its not-too-strong investments in research and development and its interest in selling itself off. Other investors see it as undervalued, with rapid growth and fat profit margins.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.
Looking for promising investments? Check out our free special report -- "The Stocks Only the Smartest Investors Are Buying" -- and learn which stocks are appealing to Warren Buffett and other great investors.