Paulson Joins Einhorn--in Gold

We reported earlier that Seth Klarman was investing in gold--like Einhorn. Paulson is getting long the noble metal as well:

Paulson, bought a stake in AngloGold Ashanti Ltd. (AU) from Anglo American Plc for $1.28 billion as hedge funds increase their gold holdings.

Paulson paid $32 a share for the 11.3 percent stake in the Johannesburg-based gold miner, Anglo American said today in a statement. The purchase makes Paulson the company’s second- largest shareholder, according to data compiled by Bloomberg. Paulson also owns a 4.1 percent stake in Kinross Gold Corp (KGC)., making the hedge fund the fourth-largest holder of the gold producer.

Hedge funds are turning to gold to mitigate potential inflation as governments around the world increase spending to stimulate their recession-bound economies. David Einhorn, founder of New York-based Greenlight Capital Inc., told investors in January that he is buying gold for the first time. Hayman Advisors LP’s Kyle Bass said investors are seeking precious metals as central banks print more money.

“Hard currency is coming to the fore, as evidenced by the investment choices of some of the world’s most seasoned investors,” AngloGold Ashanti Chief Executive Officer Mark Cutifani said today in an e-mailed statement.

Klarman Joins Einhorn--in Gold

We already mentioned here that Einhorn was buying gold. This article mentions that and adds that another great investor is acting on the same concerns.

Klarman, head of The Baupost Group, told investors in October that the firm had built a "sizable position in low-cost inflation protection for the next three to five years."

"The extraordinary and unpaid-for financial market bailout should add to inflationary pressures over time," he added. "The dollar will likely weaken over time, perhaps in a hurry, and gold may further strengthen."

Quotes from Margin of Safety

"Investors in a stock expect to profit in at least one of three possible ways:

a. From free cash flow generated by the underlying business, which will eventually be reflected in a higher share price or distributed as dividends.

b. From an increase in the multiple that investors are willing to pay for the underlying business as reflected in a higher share price.

c. Or by narrowing of the gap between share price and underlying business value."