market folly

While John Paulson's position in AngloGold Ashanti (AU) is no secret, his hedge fund has just filed a 13G with the SEC in regards to the position. Paulson & Co has disclosed a 12.1% ownership stake in AngloGold Ashanti due to activity on May 20th, 2009, with the bulk of the position in his Advantage Plus fund. They now show holdings of 42,849,801 shares of AU. We covered their initial purchase on March 23rd when Paulson & Co took a large position in AngloGold at $32 a share.

This is just one of the many gold miners that Paulson's hedge fund now has a stake in. He additionally likes the Gold Miners ETF (GDX), Gold Fields (GFI), and Kinross Gold (KGC). When we just last week looked at Paulson's entire portfolio, we noted his massive stake in the precious metal Gold, bought through ticker GLD. While the firm was out saying that they were hedging themselves since they have a fund class of shares denominated in gold, they still clearly are bullish on the metal. Otherwise, why would they purchase so much GLD and various gold miners? Their combined positions in gold related entities has become ridiculously large. With all the recent action, we'd recommend checking out a great technical analysis video on Gold, which shows how the metal is setting up as a trading/investing entry point.

While Paulson is bullish on Gold, he has also become slowly constructive on the housing sector, as he has started a real estate recovery fund. His hedge fund has generated massive returns over the past two years, as he bet against financials and all things subprime. One of his funds was even up 589%. And, in the first part of 2009, he had also profited by shorting UK banks. At the end of 2008, Paulson's Advantage Plus fund ended the year +37.58%. For more information on how Paulson performed in 2008, be sure to check out their year end letter & report.

Paulson began shorting collateralized debt obligations and buying credit default swaps back in 2005 as he had conviction in his bet. His Credit Opportunities fund launched in 2006 with $150 million aimed to short subprime mortgage backed securities. This fund enjoyed immediate success, causing him to launch the Credit Opportunities II fund. At the end of 2007, the Opportunities fund was up 590% and his Opportunities II fund was up 353%. Such sterling performance led Paulson's hedge funds to be the #1 and #4 funds as ranked in Barron's hedge fund rankings (top 100). Paulson's funds earned this distinction due to their solid 3 year annualized performance metrics. Additionally, Paulson sits at #3 on Alpha's hedge fund rankings list for 2009, which is compiled based on assets under management (aum).

Obviously, such great performance has led to many other accolades for Paulson on a personal level. Recently, Paulson graced Forbes' billionaire list, but that one is almost a no-brainer. More notably, he was among the top 25 highest paid hedge fund managers of 2008. While Paulson's past bets have landed him great success, he now has laid plans for his next major set of investments. Inflation seems to be right in his sights.