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TheStreet Open House

Paulson's 10 Best New Investment Ideas

BOSTON ( TheStreet) -- Paulson & Co. founder John Paulson has endured a tumultuous year as his hedge fund has fallen more than 30%. The billionaire investor is seeking to rebound with new investments in companies including News Corp. (NWSA) and Mosaic (MOS).

After earning a record amount -- $5 billion -- for a hedge-fund manager last year with the help of gold and bank stocks, Paulson is now slashing holdings in many of those investments as his fund's performance has badly lagged behind the broader market. Paulson's flagship Advantage Plus Fund has plummeted 31% this year, according to several media reports that cite investors in the fund.

John Paulson (Paulson & Co.)

Paulson in July announced during an investor call that he was reducing his net long exposure to 60% from 81% previously, according to a Reuters report, with the hedge fund manager saying "we cannot operate the fund at level. I'd like to bring the risk down further to about 50%." He admitted he was "too aggressive" with some stock bets, the report said.

Paulson's second-quarter filing reveals that he slashed positions in financial stocks like Bank of America (BAC), Citigroup (C), CIT Group (CIT) and SunTrust Banks (STI), among others.

Meanwhile, he reduced his stakes in gold companies AngloGold (AU), Gold Fields (GFI) and Kinross Gold (KGC). Paulson maintained his 31.5 million-share position in the SPDR Gold Trust (GLD) ETF, which had a market value of $4.6 billion as of June 30.

>>View John Paulson's Portfolio

Paulson & Co. also eliminated entire positions in 20 companies, including Boston Scientific (BSX), J.C. Penney (JPC) and Lorillard (LO).

On the other hand, Paulson increased his established stakes in companies including Wells Fargo (WFC), Ralcorp Holdings (RAH) and Capital One Financial (COF).

Most interesting to investors are Paulson's newly initiated positions, which could be the foundation for a rebuilding after the fund's rout. The investor came to prominence in 2008, when he scored sevenfold gains betting on the decline in subprime-mortgage securities.

Overall, Paulson added 12 new investments to the fund last quarter. The following pages detail Paulson & Co.'s 10 largest new positions in the second quarter, ranked by market value as of June 30.






10. RLJ Lodging Trust (RLJ)

Company Profile: RLJ Lodging invests primarily in premium-branded and compact full-service hotels.

Paulson's Investment: The hedge fund bought 2.7 million shares of RLJ Lodging during the second quarter, a position valued at $47 million as of June 30.

Share Price Performance: Since the stock's debut in May, RJL Lodging shares have plunged about 21%, with most of the decline coming in August as markets crumbled following the Standard & Poor's downgrade of U.S. debt. Since June 30, shares are down about 20%, meaning the position is probably underwater if Paulson is still a holder.

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