FEBRUARY 14, 2012, 7:36 PMHEDGE FUNDS
BY AZAM AHMED
Article from Deal Book
Jin Lee/Bloomberg News
John Paulson, the founder of the hedge fund Paulson & Company.
It’s that time of the year when managers of hedge funds big and small disclose what stocks they own. While the quarterly data look backward — the filings made Tuesday are for holdings through year-end — they offer avid watchers a sense of what the most prominent investors are doing in the industry.
Lone Pine Capital, a highly respected hedge fund run by Stephen F. Mandel Jr., bought up a big chunk of the SPDR gold exchange, worth about $570 million. Gold has been a favorite among hedge fund managers, especially among those with dour views on the United States economy.
Mr. Mandel also took positions in Baidu, the Chinese Internet search engine, worth about $280 million, and a more than $200 million position in the yoga-wear company Lululemon. He increased his stakes in Priceline.com, Google and Visa. Mr, Mandel sold off about 24 million shares of the News Corporation, or about $376 million worth.
At Appaloosa Management, the hedge fund’s founder, David Tepper, took on small, new positions in Boston Scientific and Oracle, while adding to his holdings of the hedge fund (and consumer) favorite Apple as well as General Motors. Mr. Tepper sold stakes in US Airways, Valero Energy and Macy’s.
David Einhorn of Greenlight Capital, meanwhile, bought 14 million shares of Dell worth about $200 million in the last quarter of the year, while also picking up about 17 million shares in Xerox (worth $134 million). No surprise that the manager increased his stakes in Apple and G.M. (just as Mr. Tepper did). Mr. Einhorn now has a roughly $600 million position in Apple, and a nearly $400 million position in G.M.
John Paulson, the founder of the hedge fund Paulson & Company, spent the last quarter of the year shedding shares in banks and financial firms that had become something of an albatross for him. He sold about $643 million worth of Citigroup shares and almost $400 million in Bank of America shares. He also reduced his holdings in Wells Fargo, Capital One and Suntrust Banks. Mr. Paulson suffered the worst year of his investing career in 2011, when one of his main funds lost more than 50 percent on ill-timed bets and other investing catastrophes.
As he looks to reclaim those huge losses, which could require gains of more than 100 percent in some funds, he took on a few new positions while raising his stake in others. Mr. Paulson now owns about $1.1 billion worth of Delphi Automotive, the once-bankrupt car-parts manufacturer. He also owns about $100 million worth of the energy company El Paso Corporation.
But what Mr. Paulson really seems to be interested in these days is jostling the Hartford Financial insurance company, whose share price has plummeted about 30 percent over the last year. The investor took the company to task for its lagging performance during its fourth-quarter earnings call last week, and is circulating presentations about how a breakup of the company could increase the share price by as much as 60 percent.
The hedge fund is taking its case to the market, significantly raising its stake (it now owns about 8.4 percent of outstanding shares, according to a regulatory filing Tuesday) while it campaigns to force the firm to separate its property and casualty insurance business from its life insurance business.
“Hartford trades at 44% of book value compared to 81% for life peers and 106% for P&C peers” reads a headline from a Feb. 14 presentation about the company.
The moves ring of activism, a strategy practiced by many a hedge fund manager, from the old school raider Carl C. Icahn to his figurative heir, William A. Ackman. But it is a new strategy for Mr. Paulson, who has largely stuck to merger arbitrage and is best known for his credit bet against the subprime mortgage market that earned him billions of dollars.
Why exactly Mr. Paulson has decided to add to his repertoire is unclear. But he seems familiar with the playbook. In his filing Tuesday, Paulson & Company indicated it would be potentially speaking with other investors about next steps for the company.
Article from Deal Book
