Are Stocks Too Risky? Fund Manager John Paulson Thinks So

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(List compiled by Andrew Dominguez. Andrew owns shares in C. Data sourced from Finviz and Whale Wisdom.)

Last week, Kapitall published a list of stocks being dumped by hedge funds, which is part of the larger trend of institutional investors pulling out of unstable, risky asset markets.

In an exclusive report last Thursday, Svea Herbst-Bayliss of Reutersdetails hedge fund manager John Paulson’s similar portfolio trimming strategy. Paulson has been a widely followed investor over the past several years.

“Until this year, Paulson was the toast of the $2 trillion hedge fund world after his big gamble on the collapse of the U.S. housing market made him a billionaire many times over."

"Paulson now says that his timing may be off on his bet that U.S. economy is poised for a strong rebound,” writes Herbst-Bayliss.

Paulson’s funds have suffered heavy losses this year, in large part due to an inopportune investment in Sino-Forest, a Chinese plantation operation whose share prices plummeted after it received serious allegations of fraud from research firm Muddy Waters. 

Paulson has since cut his funds’ stock allocations from 81% to 60%. He is planning on cutting this number further, according to Herbst-Bayliss.

“Eighty-one percent was way too high. We cannot operate the fund at that level… I'd like to bring the risk down further to about 50 percent," Paulson told Reuters. 

The report cites the European debt crisis, possibly tighter regulation in the US, and the slow pace of economic activity in the US as Paulson’s chief risk concerns.

So which stocks were included in his portfolio during his most recent regulatory filing? Which of these stocks has he sold? We're going to have to wait for his next update. In the meantime, use this list as a starting point for your next investing idea.

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List sorted according to allocation percentage of portfolio.

1. SPDR Gold Shares (GLD): Exchange Traded Fund industry with a market cap of $64.02B. It comprises 13.43% of his fund's portfolio. Share prices are up 12.54% year-to-date.

2. AngloGold Ashanti Ltd. (AU): Gold industry with a market cap of $16.97B. It comprises 6.0% of his fund's portfolio. Share prices are down 9.47% year-to-date.

3. Transocean Ltd. (RIG): Oil & Gas Drilling & Exploration industry with a market cap of $20.59B. It comprises 5.82% of his fund's portfolio. Share prices are down 6.20% year-to-date.

4. Citigroup, Inc. (C): Money Center Banks industry with a market cap of $117.58B. It comprises 5.56% of his fund's portfolio. Share prices are down 14.87% year-to-date.

5. Anadarko Petroleum Corporation (APC): Independent Oil & Gas industry with a market cap of $41.44B. It comprises 5.30% of his fund's portfolio. Share prices are up 9.62% year-to-date.

6. Bank of America Corporation (BAC): Mid-Atlantic Regional Banks industry with a market cap of $102.82B. It comprises 5.03% of his fund's portfolio. Share prices are down 23.95% year-to-date.

7. Hartford Financial Services Group Inc. (HIG): Property & Casualty Insurance industry with a market cap of $10.63B. It comprises 3.61% of his fund's portfolio. Share prices are down 9.24% year-to-date.

8. Hewlett-Packard Company (HPQ): Diversified Computer Systems industry with a market cap of $76.12B. It comprises 3.12% of his fund's portfolio. Share prices are down 12.37% year-to-date.

9. Comcast Corporation (CMCSA): CATV Systems industry with a market cap of $68.74B. It comprises 3.02% of his fund's portfolio. Share prices are up 14.62% year-to-date.

10. SunTrust Banks, Inc. (STI): Money Center Banks industry with a market cap of $13.93B. It comprises 3.02% of his fund's portfolio. Share prices are down 12.0% year-to-date.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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