Hedge Fund Tracking: Paulson & Co (John Paulson) - 13F Filing 3rd Quarter 2008

This is the 3rd Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here. We're aiming to cover 35 or so prominent funds this time around and we'll be releasing the 13f analysis of each individual fund here in the coming weeks. We've already covered Whitney Tilson's T2 Partners, Peter Thiel's Clarium Capital, Bill Ackman's Pershing Square, Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, Timothy Barakett's Atticus Capital, John Griffin's Blue Ridge Capital, and Bret Barakett's Tremblant Capital. Next up, we have John Paulson's Paulson & Co. Paulson & Co is famous for making a fortune by betting against sub-prime when this whole mess began to unfold. And, it appears as if Paulson is still up to his fortune-making ways. One of his funds has generated a 589% return, which could easily be up there amongst the largest returns by a single hedge fund in a year. Paulson's Advantage Plus fund has returned 19.44% year-to-date as of the end of August. This is the same fund that gained 158% the year prior and has grown to almost $9 billion.

Paulson's bet against sub-prime has paid off and he has recently reversed course on that bet and has started to buy the assets he was previously short. In addition to his dances in sub-prime, Paulson recently disclosed a 14.6% stake in Cheniere Energy (LNG). And, prior to that, it was revealed that he was short UK banks. As we noted in our October hedge fund performance update, Paulson & Co's advantage plus fund was up 29.4% at the end of October. And, a week ago, Paulson went before Congress to testify with regards to the hedge fund industry.

The following were Paulson's long equity and options holdings as of September 30th, 2008 as filed with the SEC.


New Positions (Brand new positions that they initiated in the last quarter):
Applied Biosystems (ABI)
Anheuser Busch (BUD)
Rohm & Haas (ROH)
Barr Pharma (BRL)
Genentech (DNA)
BCE inc (BCE)
Merrill Lynch (MER)
NRG Energy (NRG)
Brocade Comm (BRCD)
Time Warner Cable (TWC)
Hercules (HPC)


Added to (Positions they already held but added shares)
none


Reduced Positions (Positions they sold some shares of - note not all sales listed)
Mirant (MIR): Reduced position by 6%
Philip Morris Intl (PM): Reduced position by 14%
Macrovision Solutions (MVSN): Reduced position by 38%


Positions with no change
Boston Scientific (BSX)
Kinross Gold (KGC)
Wrigley
Dr. Pepper Snapple (DPS)
Affiliated Computer (ACS)
Cheniere Energy (LNG)
Equity Media Holdings (EMDA)
Tronox (TROXB)


Removed Positions (Positions they sold out of completely)
WH Energy Services (WHQA)
Hercules Offshore (HERO)
Navteq (NVT)
Choicepoint (CPS)
Applera
Nymex (NMX)
Bank of America (BAC)
EDS (EDS)
Yahoo (YHOO)
Clear Channel (CCU)


Top 20 Holdings (by % of portfolio)

1. Anheuser Busch (BUD): 25.8% of portfolio
2. Rohm & Haas (ROH): 14.8% of portfolio
3. Boston Scientific (BSX): 14.5% of portfolio
4. Barr Pharma (BRL): 9% of portfolio
5. Kinross Gold (KGC): 6.5% of portfolio
6. Applied Biosystems (ABI): 4.8% of portfolio
7. Mirant (MIR): 4.8% of portfolio
8. Genentech (DNA): 4.2% of portfolio
9. Philip Morris Intl (PM): 4% of portfolio
10. Wrigley: 3.9% of portfolio
11. BCE (BCE): 2.7% of portfolio
12. Merrill Lynch (MER): 1.3% of portfolio
13. NRG Energy (NRG): 0.7% of portfolio
14. Brocade Comm (BRCD): 0.6% of portfolio
15. Dr Pepper Snapple (DPS): 0.6% of portfolio
16. Time Warner Cable (TWC): 0.5% of portfolio
17. Macrovision Solutions (MVSN): 0.3% of portfolio
18. Hercules (HPC): 0.28% of portfolio
19. Affiliated Computer (ACS): 0.25% of portfolio
20. Cheniere Energy (LNG): 0.15% of portfolio

Assets listed in the long portfolio this quarter were a little over $7 billion when compared to last quarter's $5.7 billion or so. It definitely looks as if Paulson is trying to play it "safe" in the equity markets by betting on mergers he thinks will still get done despite the credit crisis. His large stakes in ROH and BUD clearly illustrate that. Please note that Paulson's holdings are not necessarily primarily in equity markets, as they operate in numerous other markets. Also, keep in mind that these filings only include long equity and options holdings and do not reflect the cash or short equity portions of their portfolio. This is the tenth hedge fund we've covered in our 3rd quarter 2008 edition of our hedge fund tracking series in which we're tracking 35+ prominent funds. We've already covered Whitney Tilson's T2 Partners, Peter Thiel's Clarium Capital, Bill Ackman's Pershing Square, Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, Timothy Barakett's Atticus Capital, John Griffin's Blue Ridge Capital, and Bret Barakett's Tremblant Capital. Overall, its been one of the worst years ever for hedge funds, as we noted in our recent October hedge fund performance update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.

More on Paulson & Co:
- Hedge Fund October performance numbers
- Paulson's congressional testimony
- Paulson's stake in Cheniere Energy (LNG)
- Paulson & Co shorts UK banks

Hedge Fund Year to Date Returns (Paulson, D.E. Shaw, SAC, & More)

Well, we recently got an update as to just how poorly hedge funds are performing year to date. Don't get me wrong, there are of course some standout performers. But, for the most part, they are taking it on the chin. So, if you are an individual investor getting your ass handed to you in this market.... you're not alone. Even some of the best and brightest in the game are right there with you. Hell, you're probably even outperforming some of these funds. Courtesy of the Wall Street Journal, we get a look at many notable hedge fund's performance year to date.

The Standout Performers

• $35 billion Paulson & Co: +18% ytd
• $26.3 billion Brevan Howard: +16% ytd
• $37.1 billion D.E. Shaw: +8% ytd
• $30.9 billion Bridgewater Associates: +6% ytd
• $33.3 billion Och-Ziff Capital: +0.5% ytd
• $16 billion Winston Capital: +10% ytd
• $10 billion Caxton Associates: +5% ytd
• $17 billion Tudor Investment Corp: +3% ytd
• $16 billion SAC Capital: +1.5% ytd
  

The Not-so Standout Performers

• $49.3 billion Highbridge/JP Morgan (Multistrat fund): -2% ytd
• $33 billion Farallon Capital: -6% ytd
• $23.7 billion GLG Partners: -14% ytd
• $13 billion Eton Park Capital: -1% ytd
• $19 billion Citadel Investment Group: -6% ytd
• $18 billion Lone Pine Capital: -8.5% ytd
• $12.5 billion TPG-Axon: -11% ytd
• $8 billion Cantillon Capital: -12% ytd
• $15 billion Atticus Capital: -25% ytd

The Slightly Mixed Bag

• $29.5 billion Renaissance Technologies: One of their funds is -1% ytd, while their signature Medallion fund is +40% ytd
• $26.9 billion Goldman Sachs: One of their funds is -2% ytd, while their Global Alpha fund is +17% ytd

And, according to Hedge Fund Research, Inc., hedge funds are having their worst year since 1990 (when they started tracking). They show that the average hedge fund is -3.43% ytd compared to -12.65% in the S&P500 and +1.05% in the Lehman Bros Bond Index.

So, results all across the board. Interesting to note though, that Atticus Capital is down 25% year to date. Just yesterday, there were rumors circulating that they were liquidating as I wrote about here. Tim Barakett, the founder of Atticus, came out and denied those rumors. The reason for such a large decline is pretty easy to pinpoint. As I've written about before, their portfolio had very heavy exposure to the likes of Freeport McMoran (FCX), Mastercard (MA), and NYSE Euronext (NYX); all of which have really been beaten down badly as of late. So, the rumors of liquidation weren't completely illogical, seeing as how the fund is down big this year. But, I want to reiterate again that they have denied the rumors that they were liquidating.

On another note, the algorithm master Jim Simons and his Renaissance Technologies Medallion fund are up big this year; very big. That's all I can really say about that, seeing as his entire operation is one giant quant enigma. D.E. Shaw & Co, fellow quant masters, are doing decently, up 8% year to date in this horrid tape.

Lone Pine Capital, managed by Stephen Mandel, (whom I frequently cover here on the blog), isn't having the best of years, but isn't getting slaughtered like Atticus is. Lone Pine is down a little over 8% year to date. You can view their most recent portfolio holdings as I analyzed here.

The "Commodities Corp Offspring," Paul Tudor Jones and Bruce Kovner have been playing the commodities markets smartly with their macro funds it seems. Jones' Tudor Investment Corp is up 3% ytd, while Kovner's Caxton Associates is up 8% ytd. With the wild swings in the commodities markets claiming the life of the Ospraie fund, I'm sure Tudor Jones and Kovner are happy to turn a profit. This year has been one wild ride, to say the least.

And, lastly, John Paulson is still kicking ass and taking names; up 18% year to date. You'll remember that Paulson correctly pegged the subprime crisis last year and profited handsomely from it.

So, there you have it. See how you stack up against some of the most revered names in the game. Some are dominating, while others are getting dominated. Welcome to the bear market.

Source: WSJ

Hedge Fund Activity / 13F

(Just FYI: This post marks the first of a series I will be doing this week that details what the "smart money" has been up to lately.)

Four times a year, hedge funds & asset managers with > $100 million AUM (assets under management) are required to report to the SEC their holdings from the previous quarter. I check these 13F filings quarterly just to get a sense as to where these funds are putting their money sector wise. If you just sit down and do some simple number crunching between last quarter's 13F and this quarter's 13F, you can see exactly where these funds have been moving their money.

Now, these 13F's should be treated as a lagging indicator simply because the 13F's that were just released May 15th 2008 show the funds' holdings as of March 31st 2008. So, in the past month and a half, they could have completely changed their portfolio. But, at the same time, its easy to see which sectors they are flocking to.

I like to specifically follow value based hedge funds in the hope that they won't experience ridiculously high turnover and thus allowing me to track their sector rotations. Specifically, I follow the Tiger Cubs (otherwise known as the proteges of former Tiger Management legend Julian Robertson). Many of these former proteges/right hand men have started their own funds and here are the ones I've been following:

- Blue Ridge Capital (John Griffin)
- Lone Pine Capital (Steve Mandel)
- Maverick Capital (Lee Ainslie)
- Viking Global (Andreas Halvorsen)

Additionally, I also like to follow the Commodities Corporation "offspring" which typically employ a global macro strategy.

- Tudor Investment Corp (Paul Tudor Jones)
- Moore Capital (Louis Bacon)
- Caxton Associates (Bruce Kovner)

So, I follow a core of value funds in depth and then I also follow a core of global macro funds in depth. Over the next week, I will be going into detail as to what those specific funds were up to this past quarter. Additionally, I like to follow other "whales" and funds that are not necessarily value based, but are still top performers on Wall Street. I won't be going into detail on some of these names, but I will provide some very useful links that give a broad overview of what some of these whales have been buying/selling. Because, after all, you've got to at least keep tabs on what these guys are doing:

- Warren Buffett (obviously)
- Carl Icahn (rabblerousing at its best)
- RBS Partners (Eddie Lampert)

Then, of course, there are some just straight up beastly funds which you have to keep an eye on due to their awesome returns over the years:

- Atticus Capital (Timothy Barakett)
- BP Capital (Boone Pickens)
- Greenlight Capital (David Einhorn)
- Paulson & Co (John Paulson)
- D.E. Shaw & Co (David E. Shaw)
- Jana Partners (Barry Rosenstein)

And, lastly, a few deep value & activist funds.

- Third Point (Daniel Loeb)
- Pershing Square (Bill Ackman)
- Okumus Capital (Ahmet Okumus)
- T2 Partners (Whitney Tilson)
- Tontine Partners (Jeffrey Gendell)

So, over the coming week I'll touch on some important position moves some of these funds/whales have made (new positions, removed positions, etc). And, specifically, I'll be looking in depth at some of my favorite funds on a quarter by quarter comparison. Here are the links to my in-depth analyses of said funds.

- Blue Ridge Capital
- Lone Pine Capital
- Maverick Capital
- BP Capital
- Atticus Capital