Soros, Paulson: Hedge Fund Dollar Store

NEW YORK ( TheStreet) -- Hedge fund titans George Soros, of Soros Fund Management, and John Paulson, of Paulson & Co., are known for their deep pockets, but their portfolios include more than a few stocks they could have bought for what they probably consider spare change.

Quarterly filings made by both funds revealed on Monday just what stocks they'd bought and sold in the first quarter. The lists included plenty of household-name brands like Apple ( AAPL) and JPMorgan Chase ( JPM).

But small-cap stocks were also prominent in their quarterly trading decisions, particularly in the case of Soros.

It shouldn't come as a surprise that both hedge funds are buying shares of companies with stock prices at or less than $10, along with blue chips and the complex derivatives that don't make these quarterly filings.

After all, Paulson bought a stake in Family Dollar Stores ( FDO) in the first quarter, acquiring 6 million shares of this literal dollar store. It was a good bet, too, even though shares in the cut-rate retail chain don't trade at a price befitting their brand name. The stock started the first quarter at $27 and have risen more than 30% since.

Soros and his team love dollar-store stocks even more than Paulson. Soros, too, owns a stake in Family Dollar, as well as more than 1 million shares in Dollar General ( DG) stock and a smaller stake in Dollar Tree ( DLTR).

Though Soros lightened up on all three holdings in the first period of 2010, he bought a bevy of a different kind of dollar-store stock.

Paulson's biggest small-cap bet in the first quarter was Beazer Homes ( BZH), which early in the period was just under $4 a share and had risen to $5.50 by the close on Tuesday, thanks to the revelation of the Paulson investment and an upgrade to buy from Goldman Sachs ( GS).

The Paulson bet on Beazer Homes received a lot of attention on Tuesday, since Paulson famously made a big short call on the housing sector before it crashed.

There were also a few cheap, big name stocks in which both Paulson and Soros have been active traders in recent quarters, Citigroup ( C) chief among them.

Soros parted ways with Citigroup in the first quarter, selling almost all of his 95 million share stake in the megabank, while Paulson kept his holdings steady at just over 500 million shares.

Both fund managers continue to bet that a profit-taking opportunity in shares of Boston Scientific ( BSX) lies ahead. It would have to, since Boston Scientific shares, currently trading under $7, did nothing but slide throughout the first quarter.

Soros, who upped his stake in the medical-device underdog by 500,000 shares in the first quarter, can't touch Paulson in terms of banking on Boston Scientific shares to rebound: Paulson had a 100 million share stake in the company coming into the first quarter, and didn't change it.

All the while, Boston Scientific's business has gone from bad to worse as the company recalled a pacemaker from the market for a month. (The situation has since been resolved.)

One of the biggest dollar-stock plays from Soros was in shares of Conexant Systems ( CNXT), a semiconductor company in which Soros bought more than 2 million common shares in the first quarter.

The Soros filing also detailed holdings of 106 million Conexant convertible notes. Conexant management said during its second-quarter conference call that it planned to use recent capital market proceeds to complete a tender offer for all of its outstanding notes, but more than $100 million in notes remains outstanding as note holders did not elect to sell.

Soros, of course, knows his international banking, and he found an investment candidate in BBVA Banco Frances ( BFR), buying 1.2 million shares. By the end of the first quarter, shares of the Argentine bank had spiked from under $6 a share to nearly $8. The stock has since slid back to $6.40 as unrest in the international markets hit financial shares around the globe.

Epicor Software ( EPIC), a business enterprise software company that saw its share price rise from $7.62 to almost $10 in the first quarter, was also a beneficiary of additional Soros buying. The hedge fund manager upped his stake in convertible bonds issued by Epicor, to a level equivalent to 114 million total shares, or 18 million shares more than the previous quarter.
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Soros seems to like his cheap business technology stocks, adding 1 million shares to a position in Extreme Networks ( EXTR), a network infrastructure company, which trades at under $3 a share. The hedge fund's total interest in the company rose to 8 million shares.

Soros and Paulson are both famous for playing energy stocks and commodities from oil to gold. Both managers, for instance, continue to invest heavily in the yellow metal.

In energy, Paulson made a notable portfolio addition of 3 million shares of XTO Energy, and took an initial 3 million-share stake in Devon Energy ( DVN).

Soros, though, made a true energy dollar-store bet in the first quarter, buying more than 1 million shares of independent oil and gas explorer Cano Petroleum ( CFW), which traded at a share price below $1 at several points during the first period. Cano shares closed at $1.13 on Tuesday.

-Reported by Eric Rosenbaum in New York.


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