Hedge fund legends George Soros and John Paulson have found several areas for investments that they think will prove profitable.

Soros is focusing on Brazil, India and China, while Paulson is bullish on mortgage securities, distressed debt and leveraged loans, The Wall Street Journal reported.

Soros suffered from emerging-market investments last year, but he remains enthusiastic.

"Maybe we're making the same mistake again by thinking that China and India will decouple from the developed world," he told The Journal.

However, "China is the major beneficiary of the collapse of the financial system,” Soros said. “For them it was an external shock. Because China is in a position to stimulate its economy, it will be a motor for the global economy.”

As for Paulson, "We completely shifted our focus on the credit markets from one which had a short bias starting in 2006 to one that is aggressively long," he told The Journal.

During the last four months, Paulson purchased top-rated residential mortgage-backed bonds, commercial mortgage-backed securities, distressed debt and leveraged loans.

He also bought bank shares.

"While we don't believe bank stocks in general are undervalued, we do believe many represent compelling investment opportunities over the cycle," Paulson said.

Superstar analyst Dick Bove also is bullish on banks.

“I think that the banks will show somewhere between a 300 percent to 500 percent increase in earnings over the next four to five years,” he told Forbes.