No hedge fund was more successful in a volatile 2007 than Paulson & Co., which was up an amazing 435% on the year even as the average hedge fund returned a paltry 10.5%. Formed by ex- Bear Stearns trader John Paulson in the early '90s, Paulson bet that the subprime market would collapse in 2007 and shorted a large part of the ABX subprime mortgage index. Reports suggested that Paulson netted anywhere from $12 billion to as much as $20 billion in profits in 2007. Paulson and his investors profited enormously as the subprime market collapsed and as other hedge funds -- such as
Sowood-Capital-Management -- lost over 50%. Here at Stockpickr, we actively track Paulson Capital's portfolio to see what ideas it might be considering next. One of Paulson's main positions is Hologic ( HOLX). Hologic is a maker of medical appliances and equipment that caters to the baby boomers. Part of Paulson's investment thesis is a slowing economy and possible recession, but if that happens, investors typically flock to these defensive names, because their earnings are generally immune from economic problems. Recent acquisitions and a large secondary offering still have to be worked through. But with $100 million in cash, $10 million in debt, a PEG ratio of 1.2 and great growth prospects, Hologic is one stock to own no matter how the economy fares.
Paulson also owns Mirant ( MIR). Mirant produces and sells electricity and also offers platforms to trade and hedge against electricity. Paulson is making a bet on clean energy, specifically electricity. Fundamentally, Mirant is very interesting. Back in November, Mirant decided to not put itself up for sale but rather return $4.6 billion to shareholders. Looking back, this was a great move by the company, as the current credit markets would have limited the potential sale-price premium. Instead, the company announced that it would accelerate its buyback to $1 billion and another $1 billion for open market purchases. As trading volumes increase across all exchanges, and with a decrease in shares, Mirant's earning per share is locked in for '08. It also has a 20% short position. Paulson also owns Alcoa ( AA), which just beat earnings per share by 3 cents. Alcoa has a PEG ratio of 1.05. Hercules Offshore ( HERO), an offshore driller with a 15% short position, also appears in Paulson's portfolio. To check out the entire portfolio, which includes Alcoa, Boston Scientific ( BSX), Kinam Gold ( KGC) and Nasdaq ( NDAQ),
click here .