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 $16.3 billion in value as of Dec. 31. Its biggest holding by far is the SPDR Gold Trust, with about 30% of assets. Gold has long had its advocates and critics (who include Warren Buffett), but as my colleague Dan Caplinger has noted, it all comes down to supply and demand.
Interesting developments
So what does Paulson's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are Sprint Nextel and Plains Exploration & Production. Other new holdings of interest include Freeport McMoRan Copper & Gold (FCX 2.24%) and Genworth Financial (GNW). Freeport recently posted strong gains in sales of copper and gold and is cutting its costs as well. It's also expanding its scope, moving into oil and gas exploration. The stock looks attractive at recent levels and sports a 3.6% dividend, too.
Genworth is trying to turn itself around, in part by distancing itself from its mortgage insurance business. Its long-term care insurance is also poor performer lately, even as some competitors have exited that market. To counter that a bit, it will soon be charging more for policies covering women (not for joint policies for couples, though). In its recently reported fourth quarter, the company noted a recovery in the U.S. mortgage insurance business, along with revenue down a bit for the year and net income up sharply.
Among holdings in which Paulson increased its stake was Leap Wireless International (NASDAQ: LEAP), operating the discount Cricket Wireless phone service. The stock got whacked recently on a Wall Street downgrade, in part because of tough competition in prepaid phone services.
Paulson reduced its stake in companies such as private-equity and venture-capital specialist American Capital (ACAS). The company has ties to mortgage REIT American Capital Agency, which presents some risks but also offers diversification benefits. The company has been buying back shares and reducing its net debt. Bulls are looking forward to the company's reinstatement of its dividend in the near future, as management has said it would like to do, but my colleague John Maxfield has warned that the company may be too inscrutable for most investors.
Finally, Paulson's biggest closed position was Ryman Hospitality Properties (RHP 1.23%). Last year, Gaylord Entertainment sold its hotel/convention center properties to Marriott and then further evolved into Ryman, a REIT. After losing money last year, management now foresees record results in 2013. It also declared the company's first dividend, which is set to yield about 4.5%.
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, and 13F forms can be great places to find intriguing candidates for our portfolios.
