By Svea Herbst-Bayliss
BOSTON, May 15 (Reuters) - Billionaire investor John Paulsonbet more heavily on mortgage insurers during the first quarter,which suggests that his hedge fund expects the housing recoveryto grow stronger in the months ahead.
Between January and the end of March, according to aregulatory filing, Paulson's New York-based Paulson & Co took anew position of 17 million shares in mortgage insurer MGICInvestment Corp. He raised his stakes in two othermortgage insurers, more than tripling his holdings in RadianGroup Inc to 11.5 million shares from 3.5 millionshares, and raising his holdings in Genworth Financial Inc to 9 million shares from 3.9 million shares.
Paulson, like other investment managers, disclosed those andother holdings in a so-called 13-F report filed with the U.S.Securities and Exchange Commission on Wednesday. While suchfilings are backward looking and do not always reflect what amanager owns now, they do often point to trends.
Paulson's $18 billion, New York-based hedge fund is wellknown for having bet against the overheated housing marketseveral years ago. Now Paulson is clearly betting that growthwill improve and that a strong recovery in the housing marketwill continue.
While the 13-F filings do not show exactly which ofPaulson's portfolios own these names, their stock price gainsthis year likely fueled the strong run in Paulson's $1.9 billionRecovery fund.
The portfolio gained 14 percent during the first quarter andsurged more to be up 21 percent through the end of April,marking one of the very best performances in the industry, wherefunds on average have gained only roughly 5 percent this year.
Paulson's best-known funds - including the Advantage funds, which lost money in 2012 and 2011 - got off to a strong start in2013. The Advantage Plus fund was up 8.3 percent during thefirst quarter while the Paulson Credit Opportunities fund was up10.4 percent, and merger arbitrage funds Paulson Internationaland Paulson Enhanced gained 5.5 percent and 11.6 percent,respectively, people familiar with the numbers said.
In the tight-knit hedge fund industry, Paulson is largelyknown as a merger-arbitrage specialist and during the firstquarter he took on new positions where he might see an event inthe future that would push up the share price.
After having owned a chunk of Citigroup a few yearsago, Paulson took a new position in the stock during the firstquarter. He also bought 1 million shares of H.J. Heinz and now owns 2.8 million of Vodafone's Americandepositary receipts. The hedge fund also reported a new 2.69million-share stake in Hess Corp.
On the other hand, the regulatory filing showed that he cutsome stakes as well, including Hartford Financial Services Group. The fund owned 10 million Hartford shares at the end ofthe first quarter, down from 18 million shares. He also cut hisstake in Delphi Automotive by 36 percent to 8.7 millionshares.
Meanwhile Paulson, who has long owned gold and gold minersin part because he believes that inflation will eventually pickup again in light of the easy money policies of central banks,kept his stakes in the miners largely steady, the filing shows.
Paulson's gold-oriented fund, where his own money makes upthe bulk of the roughly $500 million in assets, dropped 28percent during the quarter and tumbled more in April, peoplefamiliar with the returns said.