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Investment guru John Paulson has been in the news plenty lately. If not because of his newly staked position in gold - and his intention to establish a new gold hedge fund this January - then for his clash with banking diva/analyst Meredith Whitney over whether a massive stake in Citigroup was a good investment.
Paulson's Latest
Just what is this successful hedge fund manager up to? And where is he banking on seeing further growth? His top holdings should give us a good indication. Paulson & Co., Inc. has placed its biggest bets in three sectors, financials, health care and basic materials (gold). And within those three sectors he holds six stocks that comprise a whopping 65% of his total investment portfolio of over $20 billion.
Meredith Whitney Says No
In the financials, one of Paulson's biggest stakes is in Bank of America (NYSE:BAC), a company in which he holds nearly 160,000,000 shares with a current market value of $2.7 billion. Bank of America stock is up over 500% since March lows and trades with a nominal one cent quarterly dividend. The shares also carry a gigantic 565 trailing P/E.
More controversial, perhaps, is his stake in Citigroup Inc. (NYSE:C), 300,000,000 shares that weighs in at 7% of the total portfolio and carries a net dollar value of roughly $1.5 billion. This is the gamble that Meredith Whitney, Chief at Meredith Whitney Advisory Group LLC, thinks is ill-timed. Paulson, for his part, believes BAC will double in price over the next 12 months.
A Golden Future in Healthcare
Paulson also recently took out big positions in gold, and has initiated plans to start an exclusive gold fund this January. The goal behind the fund is to combine both bullion and precious metals miners in an effort to outperform the metal itself. He claims he will be putting $250 million of his own money in the fund.
Paulson's two top holdings are the SPDR Gold ETF (NYSE:GLD) and AngloGold Ashanti Ltd. (NYSE:AU) which, combined, comprise approximately 25% of Paulson's entire portfolio.
Two more of the fund's biggest positions are from the healthcare sector. Eight percent, or $1.6 billion, is tied to the fortunes of pharmaceutical giant Schering Plough Corp. (NYSE:SGP), while over 12% ($2.5 billion) is invested in Wyeth (NYSE:WYE).
The Wrap
Monster investors don't always take monster positions in stocks, preferring instead to spread their bets out in order to minimize risk. But John Paulson's returns of late show that putting one's money where one's mouth is is more than just a test of character. It can also be a shortcut on the road to investment riches. (Learn about other legendary investors in our Greatest Investors Series.)
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By Aryeh Katz
