1. How David Tepper Became a Billionaire
2. How John Paulson Became a Billionaire in the Stock Market
As Paulson and Tepper both reported their latest portfolios, we will highlight the stocks that both John Paulson and David Tepper own. You can find out the stocks that are owned by arbitrary combinations of your favorite gurus with GuruFocus’ aggregated portfolio screen.
These are the financial stocks that both John Paulson and David Tepper own. The list includes Citigroup (C), Bank of America (BAC), Wells Fargo (WFC), Hartford Financial Services (HIG) and Royal Bank of Scotland preferred stocks. Since the beginning of the year, the giant bank stocks suffered declines even as the market advanced.
|Symbol||John Paulson||David Tepper|
|Share||Value ($1000s)||Change||Share||Value ($1000s)||Change|
Citigroup Inc. (C) John Paulson owns 41,272,220 shares of Citi, valued as $1,824 million as of March 31, 2011, which accounts for 5.32% of his equity portfolio. David Tepper owns 7,661,685 shares of Citi, valued as $339 million as of March 31, 2011, which accounts for 8.04% of his equity portfolio. Citigroup Inc. has a market cap of $116.25 billion; its shares were traded at around $40.01 with a P/E ratio of 12.9 and P/S ratio of 1.3. The dividend yield of Citigroup Inc. stocks is 0.1%.
Both Paulson and Tepper bought into Citigroup in the first quarter of 2010. In January Bloomberg reported that Paulson made $1 billion off Citi, when the stock was traded at around $50 (split adjusted). Citi stock has since declined to around $40. Paulson certainly has given back a large percentage of its gains if he had not sold out the stock. Paulson bought into Citigroup in the first quarter of 2010. He owned more than 500 million shares as of March 31, 2010. Citigroup was traded for as low as $3.15 a share to as high as $4.31 a share in the first quarter. He held the shares through Q2, and reduced his positions by 82.7 million shares in Q3.
David Tepper also reduced his position in Citi in the first quarter of this year, as the stock reached its recent peak.
Today rating agency Moody’s said it has placed the debt ratings of big banks including Bank of America, Wells Fargo and Citigroup on review for a possible downgrade.
Bank of America (BAC)
John Paulson owns 123,634,429 shares of BAC, valued as $1,648 million as of March 31, 2011, which accounts for 4.81% of his equity portfolio. David Tepper owns 17,215,849 shares of BAC, valued as $229 million as of March 31, 2011, which accounts for 5.45% of his equity portfolio. Bank of America Corp. has a market cap of $114.39 billion; its shares were traded at around $11.29 with a P/E ratio of 15.1 and P/S ratio of 0.9. The dividend yield of Bank ff America Corp. stocks is 0.3%.
Bank of America is a typical David Tepper play. He bought 47 million shares of the stock when it was traded at around $4 at the market bottom of March 2009. As the stock prices appreciated, he started to reduce his exposure. As of March 31, he owns about 17 million shares. We estimate he made at least 200 million from the stock. This is holding history of Tepper with Bank of America:
Paulson bought into Bank of America stocks in the second quarter, when the price had climbed to around $10. Paulson might not have made a lot of money with Bank of America, as the stock prices continue to decline this year. In late 2009, he predicted Bank of America would have earnings of $3 per share by the end 2012. Using a 10X multiple the stock would be worth $30 a share. This prediction was questioned by GuruFocus columnist Jacob Wolinsky, which stirred quite some discussions.
Wells Fargo (WFC)
John Paulson owns 20,500,000 shares of WFC, valued as $650 million as of March 31, 2011, which accounts for 1.9% of his equity portfolio. David Tepper owns 3,091,560 shares of WFC, valued as $98 million as of March 31, 2011, which accounts for 2.33% of his equity portfolio.
Both Paulson and Tepper bought Wells Fargo in the fourth quarter of 2009, when the stock is traded at its current levels. Therefore, none of them have probably made much with Wells Fargo. Wells Fargo was traded down at single digits at the bottom of the market crash in 2009.
Wells Fargo was the only stock that Warren Buffett bought in the last six months. His overall cost for WFC was around $22 per share, but he paid higher prices for the stock at the market peak from 2006 to 2007. Berkshire Hathaway owns more than 342 million shares of stock.
In the interviews on the Financial Crisis Inquiry Commission, Wells Fargo CEO John Stumpf said Wells truly focused on the customer. In deciding against subprime loans, he reasoned that those types of loans could not possibly work for their customers, and making the loan just for the sake of profit was inconsistent with their goals.
Hartford Financial Services (HIG)
John Paulson owns 43,920,700 shares of HIG, valued as $1,183 million as of March 31, 2011, which accounts for 3.45% of his equity portfolio. David Tepper owns 946,917 shares of HIG, valued as $26 million as of March 31, 2011, which accounts for 0.61% of his equity portfolio.
Hartford Financial Services is one of the nation's largest investment and insurance companies, offers a complete line of insurance and financial service products to customers all over the world. Hartford Financial has a market cap of $11.49 billion; its shares were traded at around $25.84 with a P/E ratio of 5.6 and P/S ratio of 0.5. The dividend yield of Hartford Financial Svcs. stocks is 1.6%.
Hartford was traded at above $100 at the market peak of 2007. It then crashed to single digits, and has since recovered to the $20s. Both Tepper and Paulson bought the position in the third quarter of 2009, when it was traded at below $20. Paulson then added more shares in the first quarter of 2010 at the prices close to where it is traded now.
Tepper started to reduce his Hartford position in the third quarter of 2010.
Of course the question is, if it is good enough for John Paulson, is it good enough you?
Royal Bank of Scotland preferred stocks
Both John Paulson and David Tepper own a bunch of preferred stocks in Royal Bank of Scotland.
David Tepper invested heavily in preferred stocks, when those were sold at a few bucks a share with a par value of $25. Currently these preferred are traded at $17-$18 a share. John Paulson is still adding to the positions, while David Tepper keeps his positions unchanged.
David Tepper sold out RBS preferred 8.5% series F and 8.05% series H preferred when those were sold at close to par values. He keeps others unchanged because these are still traded at lower prices. For more information on David Tepper’s preferred stocks, go to this link.
Preferred stocks are usually not in the portfolios of average investors. But value investors should certainly take a look at them. They may carry lower risks and usually they pay high dividends.
These are just some financial stocks that both John Paulson and David Tepper own. They also share some same ideas on technology stocks and home builders. For more details, go to the aggregated portfolio screen of Gurus.