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Archive for the ‘John Paulson’ Category

Rich valuations for the stock market’s global elite

The news that Paul Walsh, the CEO of Diageo, has unloaded a huge amount of stock (£16m) after exercising a raft of share options draws attention to the extent that the prices of high quality companies with strong global business franchises and the ability to generate cash have been bid up to very rich levels. The veteran market-watcher Richard Russell has observed something similar on the other side of the Atlantic.

What do billionaires Warren Buffett, John Paulson, and George Soros know that you and I don’t know?  I don’t have the answer, but I do know what these billionaires are doing.  They, all three, are selling consumer-oriented stocks.  Buffett has been a cheerleader for US stocks all along. But in the latest filing, Buffett has been drastically cutting back on his exposure to consumer stocks.  Berkshire sold roughly 19 million shares of Johnson and Johnson.  Berkshire has reduced his overall stake in consumer product stocks by 21%, including Kraft and Procter and Gamble.  He has also cleared out his entire position in Intel.  He has sold 10,000 shares of GM and 597,000 shares of IBM. Read the rest of this entry »

A Struggle For Hedge Funds

This item from the Financial Times caught my eye today:

Paulson & Co, the world’s third-largest hedge fund manager, has seen another painful month thanks to growing fears over the health of the US economy. The firm’s $9bn Advantage Plus fund, which aims to profit from trading corporate events, lost 4.26 per cent in August, according to an investor, wiping out gains made in July. The fund, Paulson & Co’s largest, is down 11 per cent so far this year.

Paulson & Co is far from alone in having had a difficult year. Very few hedge fund managers have reported strong performance in the past eight months.  The average hedge fund manager made just 0.17 per cent in August, according to Hedge Fund Research, and has returned just 1.29 per cent so far this year. Pressure is now on for many managers to deliver stronger returns in the next four months.

My long-held sceptical views about hedge funds as a group have not, shall we say, been tested by this latest news. The very best hedge fund managers are terrific, but they are a small minority, so you have to pick them with care (if that is, they allow you to invest with them in the first place). There is sufficient academic evidence to show beyond reasonable doubt that many hedge funds are charging very high fees for performance that they don’t really earn, while the risk-reward structure is heavily weighted in favour of the manager at the expense of the client.

Read the rest of this entry »

Written by Jonathan Davis

September 9, 2010 at 9:10 PM