John Paulson, the billionaire hedge fund manager battered by the selloff in gold, pared stakes in gold miners last quarter while adding shares of companies that stand to benefit from a stronger economy.
Paulson & Co., which manages $18 billion out of New York, exited its $32 million stake in Barrick Gold Corp., the world’s biggest gold producer by sales, and reduced holdings in other mining companies, according to a regulatory filing yesterday. The firm bought a $295.3 million stake in Family Dollar Stores Inc., $192.9 million in Hess Corp. shares, and a $44.2 million stake in Citigroup Inc.
Paulson & Co. also added to its stakes in takeover targets Sprint Nextel Corp. and Life Technologies Corp., which together earned the firm between $650 million and $700 million this year. Paulson has done well investing in companies undergoing mergers or restructurings, a strategy where he got his start as trader. Yet his big bets in the past two years on macroeconomic developments, such as his wager on gold, have undermined that performance.
The firm’s Gold Fund, its smallest at about $500 million and comprised mostly of Paulson’s own money, fell 47 percent this year through April, the month during which the metal had its biggest two-day decline since January 1980.
The firm last quarter sold 37,004 shares in NovaGold Resources Inc., 11,852 American Depositary Receipts in Gold Fields Ltd., 17,988 shares in Iamgold Corp., 4,310 shares of Randgold Resources Ltd. and 4,720 shares in Agnico Eagle Mines Ltd. The combined value of Paulson’s holdings in those miners dropped by $92.7 million, according to the filing with the U.S. Securities and Exchange Commission.
Gold’s ‘Pause’
“We believe gold is taking a pause in a long-term upward trend,” the firm said in an e-mailed statement. “While inflation has been slow to materialize, continued global central bank printing will drive demand for gold as an alternative currency to paper currencies.”
Paulson & Co. bought 1.63 million shares of Sibanye Gold Ltd., valued at $9.22 million, and added 50,950 ADRs of AngloGold Ashanti Ltd., of which it is the largest shareholder. Its AngloGold stake still declined by $219.4 million from the previous quarter, to $665.4 million, as the stock slumped 25 percent in the first three months of the year.
Paulson & Co.’s stake in the SPDR Gold Trust exchange- traded fund, of which it is also the largest holder, remained unchanged last quarter. The firm uses the ETF to back the gold share classes of its funds. Investors can choose between dollar- and gold-denominated shares of most of the firm’s funds.
Citigroup Stake
Paulson told investors last month that had it not been for bets on gold stocks, the event-driven Advantage fund would have been up 15 percent this year. The fund, which seeks to profit from corporate events such as takeovers and bankruptcies and has a portion invested in gold miners, rose 2.6 percent in 2013.
Paulson & Co. bought 1 million shares in Citigroup on the expectation the bank should benefit from a strengthening economy in the U.S., said a person familiar with the matter, who asked not to be identified because the information is private.
In addition to Citigroup, the firm bought 17 million new shares of mortgage insurer MGIC Investment Corp. last quarter, according to the filing, which should also benefit from a U.S. economic recovery, the person said. The stake was valued at $84.2 million at the end of the quarter.
Mortgage Insurers
Paulson & Co. added 8 million shares of Radian Group Inc. to bring its stake to 11.6 million shares, valued at $123.7 million. Paulson said in a letter to clients obtained by Bloomberg News last month that he expects shares of mortgage insurers such as Radian to surge as the housing market recovers. Radian has gained 124 percent this year.
Paulson’s Recovery Fund, the firm’s best-performing strategy this year with bets on investments designed to benefit from a long-term economic advance, gained 22 percent in 2013 through April.
Paulson & Co. also newly purchased 5 million shares of Family Dollar Stores, the second-biggest U.S. dollar-store retailer.
The firm increased its stakes in Sprint, which made Paulson & Co. $300 million after Dish Network Corp. offered to buy the company, the person said, and Life Technologies, which earned the firm between $350 million and $400 million after Thermo Fisher Scientific Inc. last month agreed to buy the company for $76 a share.
Sprint and Life Technologies are now the firm’s second- and third-largest stock holdings, ahead of AngloGold, with stakes valued at $1.44 billion and $954.8 million respectively.
