Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at investing giant John Paulson. Founded in 1994 and owned by its employees, Paulson & Co. has specialized in merger arbitrage, among other things, profiting when one company buys or merges with another (or merely announces plans to do so). It 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 263% over the past 15 full years, compared with just 124% for the S&P 500. He more than doubled the market's return over the past five and 10 years as well. That certainly gets my attention.
The company's reportable stock portfolio totaled $12 billion in value as of June 30, 2012. Its biggest holding by far is the SPDR Gold Trust, with 28% of assets. Other gold properties bring the overall gold total to 44% of the company's overall assets. Gold hasn't been the best investment lately, though, delivering its worst results since 2008 over the past quarter.
So what does Paulson's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Equinix (Nasdaq: EQIX ) , a data center optimizer whose shares have nearly doubled over the past year. It recently reported quarterly revenue up 18% and upped its projections. At an investing conference, Philippe Laffont of Coatue Management illustrated the value of the company's services by noting that the Internet is "too slow," and that a one-second delay in Amazon.com shopping carts translates into $5 billion in lost value. Some worry about the company's debt, but others think it's in an explosive arena in Big Data.
Among holdings in which Paulson increased its stake was another gold position, NovaGold Resources (NYSE: NG ) . The stock has fallen by more than 50% over the past year, and buying it seems like a risky move with the company having sold off parts of itself in order to focus more on a Donlin Creek joint venture with Barrick Gold that Barrick is no longer very interested in. Investors interest in gold might want to look at Barrick instead.
Paulson reduced its stake in a handful of companies, including private equity and venture capital specialist American Capital (Nasdaq: ACAS ) . The company has been selling off some businesses, buying back shares, and paying down debt. It's a bit worrisome that insiders have sold a substantial number of shares in the past six months, but that's not necessarily a red flag, as they may just be raising cash for personal purposes. (Still, it's a lot of selling.) Bulls anticipate the company reinstating a solid dividend in the near future, as management has said it would like to do, but it's not clear exactly when that will happen.
Finally, Paulson unloaded several companies entirely, such as Walter Energy (NYSE: WLT ) and Quad/Graphics (NYSE: QUAD ) . Walter Energy, involved in coal and natural gas among other activities, has seen its share price halved over the past year, partly due to low natural gas prices causing trouble for coal companies and low prices for coal. The company has also been expanding, buying a company that boosts its operations in Europe -- but that's problematic at the moment, too, because of Europe's financial woes. Walter's fortunes should change as global manufacturing picks up, but until then it's struggling, and weighed down by a lot of debt.
Printing company Quad/Graphics, meanwhile, has been hurt by a shift toward digital publications from print. It has been losing money in recent years, yet still initiated (and then increased) a dividend, for some reason, and a hefty one at that, recently yielding 6.7%. In its recently reported second quarter, revenue was down a bit, but debt was down and cash from operations rose.
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.
And if you're intrigued by Equinix and the potential of Big Data, check out our free report, "The Only Stock You Need to Profit From the NEW Technology Revolution," which reviews a company that has gone on to gains of more than 200% since first recommended by the Fool. Best of all, it still has room to run. You can click here to access your report -- it's totally free.