Every quarter, many money 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 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.
Paulson's latest quarterly 13F filing shows that as of March 31, 2012, his top holdings, making up roughly 30% of his portfolio, were the gold ETF SPDR Gold Shares, Delphi Automotive, and AngloGold Ashanti. Overall, the portfolio was valued at $14.8 billion, with 82 holdings.
So what does Paulson's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Ireland-based Covidien (NYSE: COV ) , the company formerly known as Tyco Healthcare. It offers operational diversification right now, dividing its attention between medical and imaging devices, pharmaceuticals, and other health-care products, but it plans to split its device and pharmaceuticals units. The company sports double-digit recent revenue and earnings growth, along with solid (and rising) net margins above 15%.
Among holdings in which Paulson increased its stake were InterDigital (Nasdaq: IDCC ) and NovaGold Resources (NYSE: NG ) . InterDigital disappointed some investors by deciding not to put itself on the block, and it seems poised to sell off some of its valuable patents. That could generate some much-needed cash for the company, but it's not a great long-term business model. Meanwhile, the company has authorized a $100 million stock buyback, which could benefit shareholders, as well.
NovaGold has sold off various assets to focus on gold, with high hopes for its Donlin mine in Alaska. NovaGold has a 50% stake there, and has referred to it as "arguably the most important gold development project in the world." Some investors aren't happy with a recent share offering that has diluted existing shares, but others are interested in NovaGold because they see it as a possible acquisition target.
Paulson reduced its stake in nearly 30 stocks, including American Capital (Nasdaq: ACAS ) , a publicly traded private equity firm. The company bought back millions of shares in the past year, which led some, such as my colleague Rich Smith, to question the wisdom of that, given the company's relatively low cash level. (Learn more about the world of private equity firms -- formerly known as leveraged buyout companies.)
Finally, Paulson unloaded several companies, including Transocean (NYSE: RIG ) . The company has taken hits due to its involvement in the big Gulf oil spill, and it's still operating under some uncertainty due to further legal and financial threats. Meanwhile, it has recently posted rising revenue, though operating income is being challenged by higher costs. The company has a hefty multibillion-dollar contract backlog and expertise in deepwater drilling, which is in some demand.
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. 13F forms can be great places to find intriguing candidates for our portfolios.
Our analysts dig into Transocean in a special free report: "3 Stocks for $100 Oil." Check it out to learn more and to meet some compelling candidates for your portfolio.