Did the “Biggest Trade Ever” Billionaire Make a Great Trade Selling These 3 Stocks?

John Paulson became an investment legend, turning bets against the subprime mortgage business into massive profits when the housing market crashed in 2007. His story was told in the book, Biggest trade everwhich details how he earned $15 billion for his Paulson & Co. the hedge fund by the correct name of the mortgage crisis.

While the billionaire has since closed the fund, he now invests through his family office, a vehicle for the uber-rich that only invests on behalf of the individual, his family and a select few others.

Paulson only owns a relative handful of stocks compared to other billionaire investors. Where Paul Tudor Jones owns nearly 1,500 shares and Jim Simons Technologies of the Renaissance is a true index fund with more than 3,400 shares, Paulson owns only 16 companies.

In fact, at the end of the first quarter, he owned three more, but he sold all the shares he owned in the three months that followed. Let’s see if dumping them from his portfolio was a great deal.

Key points about this article:

• John Paulson’s bet against the real estate market in 2007 brought him $15 billion in profits, an investment considered the “Greatest Trade Ever.”
• In the second quarter of 2024, the billionaire completely shed positions in three stocks for his family office portfolio. Another foreboding call, or is Paulson out too soon?
• If you’re looking for action with huge potential, be sure to grab our free copy brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

Carrolls Restaurant Group

Customers at the Burger King counter

The first stock I sold is the easiest to understand. Carrols Restaurant Group was the largest franchisee of Burger King restaurants in the world, but also owned several dozen Popeye’s Louisiana Kitchen locations. However, in January Restaurant Brands International (NYSE:QSR), which owns Burger King and Popeyes — as well as Tim Horton’s and Firehouse Subs — announced it will acquire the franchisee for $1 billion.

Burger King franchisees in general have fallen on hard times, losing sales to McDonald’s (NYSE:MCD) and others. Last year, two large franchisees that operate about 200 restaurants, Toms King and Meridian Restaurants Unlimited, filed for bankruptcy.

Burger King stumbled before the Covid pandemic, and where other quick-serve operators have grown subsequently, the fast-food chain has continued on a downward trajectory. This prompted Restaurant Brands International to launch the ‘Reclaim the Flame’ initiative to transform the burger chain. While acquiring some of the locations from failed franchisees, he negotiated a buyout of Carrols for $9.55 per share. Paulson, with an average purchase price of $8.70 per share for his 58,000 TAST shares, made a profit of nearly 10%.

Newmark Group (NMRK)

Executive woman on a date

The second stock the billionaire investor dumped in the second quarter was The Newmark Group (NASDAQ:NMRK), a commercial real estate services company, of which Paulson previously owned 3 million shares.

It was a curious trade because while Newark shares have traded largely sideways in the first half of the year, hovering around a narrow band between $10 and $11 a share, the outlook for the commercial real estate market itself is strong .

Although vacancy rates remain high, the outlook for interest rate cuts (now confirmed by the Federal Reserve’s half-percentage-point cut), suggests growth was coming. Analysts at JPMorgan Chase (NYSE:JPM) said, “On the pricing side, it’s going to be a landmark year when it comes to price discovery.”

That seems to be playing out with Newmark Group shares. Shares are up 39% year-to-date, but since the end of the second quarter, NMRK shares are up 55%, meaning Paulson missed out on some significant potential gains. Even so, with an average purchase price of $10.25 per share, he still made an implied profit of 48% on his holdings.

Alibaba (BABA)

Person holding his credit card in front of a laptop

The third stock Paulson sold was the Chinese e-commerce giant Alibaba (NYSE:BABA). It seems to be another stock that the billionaire got out of too early. While the company has come under intense regulatory scrutiny from Beijing, which has accused it of using monopolistic practices, Alibaba has just received a clear signal that it will no longer be under the watchful eye of the government. He reformed his ways and could pursue growth again.

BABA shares are up 25% since the end of the second quarter and are now trading at new 52-week highs. However, they are still down 70% from pandemic highs.

Paulson maintained a position of 50,000 shares for some time, but chose to close his holdings in the second quarter. With an average purchase price of $151 per share, he may have grown tired of waiting for a turnaround that never seemed to materialize. By selling when he did, Paulson had an implied loss of 47%.

Now there was a rally in the stock from late April to early May that brought Alibaba shares close to where they are trading today, so the billionaire investor could have recouped some of his investment if he sold when the stock they were hot. .

The post “Biggest Trade Ever” Billionaire Made a Great Trade Selling These 3 Stocks? appeared first on 24/7 Wall St..