Wednesday, August 12, 2009

John Paulson Makes Bank of America (BAC) 2nd Largest Holding after Gold

Do you think anyone else got wind of hedge fund manager John Paulson's move into Bank of America (BAC)? Nah - surely the big boys knowing what the other big boys are doing had nothing to do with it.

Paulson is now the 4th largest stakeholder in Bank of America. Considering we have 4 major financial oligarchs who dominate US financial commercial bank assets (plus BAC via their own operations + Countrywide shares an oligopoly in the mortgage market) as long we are sure the US will happily provide cover (which they have made it clear they will) I concur with these banks as long term "sure things". Even too bigger to fail, if you will. As some have said, you literally have Bernanke and Geithner lobbying for you on a daily basis. The balance sheet is still a black hole but balance sheets don't seem to matter anymore because of the above mentioned US taxpayer providing backstop on all future losses. So, much like some of my investments are plays on the government using taxpayers money to support certain industries or companies, Paulson is utilizing the same idea - in a much bigger way. Bank of America alone is a $2.7 Billion stake. With the stock up about 25% since the end of June it appears he already made $500M on his $2.2 investment. Boo and Yah.
  • Billionaire John Paulson’s hedge fund bought 168 million shares of Bank of America Corp. in the second quarter, a regulatory filing showed today, becoming the lender’s fourth-largest shareholder.
  • It’s the fund’s second- biggest holding after SPDR Gold Trust.
  • Paulson & Co.’s stake in the Charlotte, North Carolina- based bank was valued at $2.2 billion as of June 30, data compiled by Bloomberg show. The fund ranked behind State Street Corp., Barclays Global Investors and Vanguard Group Inc. among the bank’s biggest shareholders.
  • Bank of America is the second-largest home lender, trailing Wells Fargo & Co., after acquiring Countrywide Financial Corp. in 2008.

Interestingly Paulson also took a large stake in Regions Financial (RF) which was the one troubled regional bank we had attempted to make a play in for many months. (no recent activity of late) Might have to circle back since Paulson's team is hot and I found things I liked there as well. (market disagreed with me)
  • Paulson also bought 35 million shares of Regions Financial Corp., becoming the second-largest shareholder in the Birmingham, Alabama-based bank, according to the filing. Regions declined 8.4 percent during the quarter.

Fifth Third (FITB) also got a lot of attention with 5M new shares bought

If you are not familiar with Paulson (this is JOHN not HANK) he was one of the few investors to really nail the financial mess, and famously made buckets of money off of it. Based on that track record his moves are now watched very closely by the investment public.
  • Paulson’s Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 percent, compared with a loss of 19 percent for hedge funds on average.
Gold and US government backstopped US financials - an interesting combination. He did reduce his stake in the gold MINERS etf (GDX)
  • Paulson reduced his stake in Market Vectors Gold Miners ETF, a fund that mirrors moves in the Amex Gold Miners Index, after selling 11 million shares. He owned a 5.3 percent stake in the fund in the second quarter valued at $227 million, down from 15 percent in the first three months of the year.
But consistent with his other gold stakes
  • Paulson left unchanged his 9 percent stake in the SPDR Gold Trust (GLD), an investment fund that buys gold bullion, and a 4.4 percent stake in mining firm Kinross Gold Corp., according to the filing.
  • Paulson became the largest holder of Johannesburg-based gold producer AngloGold Ashanti Ltd. after buying 40 million shares to end the quarter with a 12 percent stake. He also increased his stake in Johannesburg-based Gold Fields Ltd., becoming the third-largest owner of its U.S.-listed shares.

[Jul 9, 2009: Latest Picks and Pans from John Paulson and George Soros]
[May 16, 2009: John Paulson Continues to Pile Into Gold]
[Mar 17, 2009: John Paulson Joins David Einhorn as Gold Bug with Stake in AngloGold Ashanti (AU)]
[Jan 31, 2009: Dealbook - John Paulson's Year End Review]
[Nov 18, 2008: Paulson Buying Mortgage Backed Securities]

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