PRESENTING: 5 Hedge Fund Gods' First Stock Picks

bill ackmanBill Ackman

Photo: Pershing Square Capital Management

CNBC’s Hedge Fund Specialist/”Squawk Box” producer Maneet Ahuja’s new book “The Alpha Masters” is out today.Ahuja—who is known for her massive Rolodex filled with the biggest names in the hedge fund industry—gives her readers a peak into the lives and careers of the most well-known and legendary investors

What’s more is she also reveals some of their earliest trades, many of which were stock picks these hedge fund heavyweights made when they were kids. 


Ray Dalio, Bridgewater Associates

Background: When Dalio just 12-years-old, he spent time working at a nearby golf course as a caddie. With his first job, he was able to collect tips from golfers, many of whom happened to be Wall Streeters. He would then take those funds and research stock ideas in the Wall Street Journal. Any stock he would pick at this age had to cost less than $5 a share and it had to be a name he recognised.

First Stock Pick: Following his own investment method, the first stock Dalio decided upon was Northeast Airlines.

Result: Dalio's first stock pick ended up tripling in value right after he bought it. In the book, Dalio recalled that if it wasn't for that successful stock pick, he may of ended up in a different field.

Source: The Alpha Masters

John Paulson, Paulson & Co.

Background: Paulson first starting trading stocks when he was 14-years-old with money his father gave him. When searching for an investment idea, Paulson would comb the New York Times for stocks trading at their lows with the widest discrepancy.

First Stock Pick: The first stock pick he settled on a company called LTV, which had a high of $66 and a low of $3. He bought it when it was trading at $3 thinking he would sell when it went back to $66.

Result: LTV ended up going bankrupt. But don't feel too bad for him. Paulson kept LTV in his portfolio and eventually the company emerged from bankruptcy and he received out-of-the-money warrants in LTV Aerospace. The stock price for LTV Aerospace soared. While he was at Harvard, the company was bought out and his stock was worth ~$18,000.

Source: The Alpha Masters

David Tepper, Appaloosa

Background: Tepper became interested in stocks because of his father, an accountant (not a CPA), used to to discuss investing with him.

First Stock Pick: When Tepper was in high school, he bought 100 shares of Career Academies for $2 a piece.

Result: That company ended up going bankrupt, but that didn't stop him from wanting to pursue a career in investing.

Source: The Alpha Masters

Bill Ackman, Pershing Square Capital Management

Background: Ackman was first exposed to the concept of value investing during a cocktail party at his parents' apartment when he was introduced to an investor named Leonard Marks. Marks recommended that Ackman read The Intelligent Investor by Ben Graham and that's what got him hooked.

First Stock Pick(s): During his first year as a student at Harvard Business School, Ackman bought his first stock -- Wells Fargo. Another one of his early investment picks was department store chain Alexander's, which filed for Chapter 11 bankruptcy protection in 1992.

Result: Ackman bought 2,000 shares of Alexander's after it filed for bankruptcy for $8-3/8ths. The company, which Vornado's CEO Steve Roth had a 27% stake in, owned a lot of very valuable real estate assets. It eventually turned into a real estate investment trust (REIT) and the stock moved above $400 a share.

Source: The Alpha Masters

Boaz Weinstein, Saba Capital

Background: When Weinstein was a student at Stuyvesant High School in New York, he entered an eight-week stock-picking competition sponsored by New York Newsday. The competitors had to pick five stocks per week and whoever made the most money would win the contest.

First Stock Pick(s): Instead of going with the obvious stock picks a high schooler would likely choose (i.e. Wal-Mart or Nike), Weinstein told Ahuja that he would scan the stock stables in The New York Times looking for the most the biggest losers and gainers, or the most volatile stocks. He said he randomly selected his stocks. It's unclear which ones he chose.

Result: He made the most money. For winning the competition, Weinstein got to visit the historic New York Stock Exchange where he gave a speech in front of senior members in one of the boardrooms.

Source: The Alpha Masters

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