Paulson & Co’s Top Stock Picks

John Paulson’s Paulson & Co had a rough time in the third quarter. The hedge fund, while named a favorite of the exclusive millionaires’ club Tiger 21 (read about it here), posted some less than impressive numbers recently.

Paulson and Timing

Paulson’s largest hedge fund lost 47% in the first nine months of the year and his other funds didn’t fare much better (see more on Paulson’s 2011 Performance). Paulson himself said later that he shouldn’t have “been running so exposed without the proper hedges in place,” but that was in October and the damage had already been done (read about it here).

Paulson’s optimism wasn’t mislaid, it was just mistimed. Unfortunately, he missed out on much of October’s rally after responding too abruptly to the big losses of August and September, selling out of positions like JP Morgan Chase (JPM). Paulson had owned 18.7 million shares of the company, in a position worth roughly $252 million, at the end of the second quarter. Paulson sold all of it in the third quarter. Since then, JPM has returned 9.51% through November 15. Paulson also sold out of State Street (STT), which has returned 27.49% from the end of September through November 15. He had closed the second quarter with 2 million shares in the company. Paulson sold out of his NYSE Euronext (NYX), Comcast (CMCSA) and BMC Software (BMC) positions as well.

(Read the rest of the article here)