Trading Like John Paulson
John Alfred Paulson is a famous investor and hedge fund manager. He leads Paulson & Co., a New York-based investment management firm. He has been called "one of the most prominent names in high finance" and "a man who made one of the biggest fortunes in Wall Street history". Paulson became world-famous in 2007 by shorting when the subprime mortgage crisis and earned "almost $4 billion" personally.
Life of John Paulson
Paulson was born in 1955 in Queens, New York. Paulson had incredible academics background. In 1978, he graduated summa cum laude in finance from NYU. He went on to Harvard Business School, on a scholarship, earning an MBA as top 5 percent of his class in 1980.
Paulson began his career at Boston Consulting Group in 1980 where he did research, providing advice to companies. His desire to move into trading and investing led him a series of positions at investment banks.
His path to word-class wealth and recognition didn't begin until 1994, when he founded the hedge fund Paulson & Co. with $2 million in capital and one employee
Paulson became world-famous in 2007 from predicting the US housing crisis. He was shorting the US housing market, as he foresaw the subprime mortgage crisis. Sometimes referred to as the greatest trade in history, Paulson's firm made a fortune and he earned over $4 billion personally on this trade alone.
Paulson made a string of huge victories from 2007 to 2010 as one of the most impressive runs in the history of the hedge fund industry. He nailed four huge trades in a row starting with shorting housing, shorting bank stocks, reversing and buying bank stocks, and then buying gold. Paulson's reputation was built upon his uncanny ability to follow the market's every move through one of its most volatile and unpredictable periods.
Beside his success, he also made several bad trade. In 2011, he made losing investments. His flagship fund, Paulson Advantage Fund, fell sharply in 2011. In 2018, one of John Paulson's hedge funds has plunged about 70 percent over the past four years.
John Paulson's Trading Strategy
Paulson specialized in "event-driven" investments — i.e. in mergers, acquisitions, spin-offs, etc. He also was known for his contrarian instincts, like shorting housing market, shorting bank stocks, etc.
What can we learn from John Paulson?
Paulson has displayed an excellent ability to identify hugely profitable opportunities that other players missing. Then he made decision based on this, and mostly did a contrarian strategy. Most of the huge fortunes Paulson made, mostly using contrarian strategy.
Hope this article inspires