Skip to main content

John Paulson, hedge funds move into gold

There was a good amount of buzz last week surrounding hedge fund manager John Paulson's move into the gold sector, one that coincided with the opening of a new Paulson & Co. fund (the "Paulson Real Estate Recovery Fund") that will invest in real estate.

Market Folly has more on Paulson & Co.'s investments in gold and the gold mining shares in, "Paulson & Co. buys tons of gold":

"The first major move that everyone will be talking about is Paulson's big entrance into gold. His position in the Gold Trust (GLD) is brand new and is brought up to a whopping 30% of his portfolio.

Now, there are indeed a few caveats with this move: Paulson & Co have said themselves that they have done so as a hedge, as they now own well over 8% of this exchange traded fund (ETF). Their hedge funds have a share class that is denominated in gold (instead of in US dollars or Euros).

Still though, that's quite a large hedge to have. Not to mention, Paulson also has a copious amount of gold miners now littered throughout his equity portfolio... And, such a massive position in gold and gold miners has to be for more than merely a hedge.

One other thing to consider with Paulson's portfolio is that these holdings listed above are only his long equity holdings. The main reason why we bring this up is because the holdings above represent only a piece of his overall portfolio pie. Many of the positions above are merger arbitrage and event driven positions. While his gold stakes may be a large part of the assets disclosed in this filing, they are not quite as big when you compare them to his total assets under management. So, keep that in mind..."

Jay at Market Folly also notes that other prominent hedge funds, including David Einhorn's Greenlight Capital and Stephen Mandel's Lone Pine Capital, have also recently made notable forays into the gold sector. So should we follow the hedge fund crowd into their recent gold trade?

Andrew Mickey offers an interesting take on this very issue in, "Why Gold Enthusiasm is 'Cool' Again". As he notes in the article, Paulson's Midas touch has made gold the new "cool" investment on Wall Street, which is enough to leave Mickey skeptical on the timing of this particular speculation.

"Right now, gold is the hot sector. Expectations are soaring and it is only a matter of time until the “hot money” finds something new. Gold is glittering now and it will do so in the future, but it’s best to buy it when it’s not being watched so closely.

Yes, I’ve bought gold and gold stocks in the past. I will be buying gold stocks again in the future. It’s all part of my personal investment plan which I’m sticking too.

Inflation is coming. Real assets and shares of producers of real assets will do exceptionally well in the years ahead. For now though, it’s best to look for value in the real asset sectors."

Check out the full piece at the link above (Hat tip to Richard Russell), and see why this writer thinks the recent gold chase has left some hard asset sectors overlooked and relatively undervalued.

Related articles and posts:

1. John Paulson in Bloomberg Markets - Finance Trends.

2. Video: John Paulson & Joseph Stiglitz - Finance Trends.

Popular posts from this blog

William O'Neil Interview: How to Buy Winning Stocks

Investor's Business Daily founder and veteran stock trader, William O'Neil shared his trading methods and insights on buying winning stocks in an in-depth IBD radio interview.

Here are some highlights from William O'Neil's interview withIBD:

William O'Neil's interest in the stock market began when he started working as a young adult. 

"I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."
He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.

"I'd get in the c…

Moneyball: How the Red Sox Win Championships

Welcome, readers. To get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter.

The Boston Red Sox won their fourth World Series titleof the 21st century this week.

Having won their first Series in 86 years back in 2004, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it?

Quick background: in late 2002, team owner and hedge fund manager,John W. Henry(with his partners)bought the Boston Red Sox and its historic Fenway Park for a reported sum of $695 million.

Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship.

This brings us to one of my favorite scenes from the 2011 film, Moneyball, in which John W. Henry (played by Arliss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pitt) over to Boston with an excellent job off…

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL! 

Please bookmark our new web address at Financetrendsletter.com

Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner.  



Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead!

As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter. You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter). 

Stay up to date with our real-time insights and updates on Twitter.