John Paulson's Gold Fund - The Midas Touch?


Since 2009, legendary hedge fund Guru John Paulson , founder of Paulson & Company, has been investing in the gold sector, adding gold mining and bullion-related companies. In 2010, he launched the Paulson Gold Fund, his best-performing fund that year, increasing 35% net. Paulson & Company attributed that year's high return to its "exposure to production, development, exploration gold mining shares and the rising value of derivatives." As the price of gold was peaking at $1424 in December 2010, Paulson's investment made $5 billion. It wasn't until the first quarter of 2011 the Gold Fund began to lose, down 1.26%. Currently, with gold prices falling for five months, Paulson's $900 million Gold Fund is down 26% this year, based on the longest gold slump in 16 years, according to Bloomberg.

In fourth quarter 2012, Paulson had held fast to a long-term outlook, keeping his largest positions in gold mining unchanged, even as George Soros and Steve Mandel unloaded precious metal company shares. John Paulson maintained his quantitative easing stance and the position that gold is the best hedge against inflation and currency debasement.

In a portfolio that features a number of gold and gold related companies, John Paulson's largest position is 35,970518 shares of Novagold Resources ( NG) . He also holds 5,921,607 shares of its spinoff NovaCopper ( NCQ) . Like Guru Seth Klarman, John Paulson has a large stake in Novagold Resources, the 50% owner company of the Alaska's Donlin Creek area, one of the largest known undeveloped gold deposits in the world. Soros sold out his NG shares in the quarter ending June 30, 2012.

Novagold Resources Inc. is a precious metals company engaged in the exploration and development of mineral properties in Alaska and British Columbia. Novagold Resources Inc. has a market cap of $935.94 million; its shares are traded at around $4 with a P/E ratio of 136.8 and P/S ratio of 3022.9. Novagold Resources Inc. had an annual average earnings growth of 22.5% over the past 10 years.

His holding history:

A spinoff of Novagold Resources, NovaCopper Inc. (NCQ ) , explores Alaska's Ambler District, a high-grade copper-zinc-lead-gold-silver property. NovaCopper Inc. has a market cap of $84.9 million; its shares are traded at around $1.85.

His holding history:

The Paulson portfolio lists 86 stocks with a total value of $16.27 billion, and is weighted towards EFTs, health care, communication services and basic materials, as of Dec. 31, 2012.

Guru John Paulson's top buys, top sells and top holdings as of fourth quarter 2012:

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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

Referenced Stocks: GLD , NCQ , NG



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