John Paulson can’t catch a break this year. Today the markets go up, but the Gold ETF, which is Paulson’s largest holding, dropped more than 3%. Paulson was first hurt by his financial holdings earlier this year. Then he was hurt by the Sino-Forest scandal. Paulson has even been hurt by Hewlett-Packard lately. If you are a contrarian, now would be the time to buy Paulson… and maybe Bruce Berkowitz.
Bank of America shares flew today after hitting a 52-week low of $6.01. That price is absurd on a lot of levels. Even if you think they need to raise capital (which is not likely), all of that is priced in many times over. Bank of America is essentially a net-net. The world hates the stock. Value investors hate the stock. Even contrarians hate the stock. At this price, it’s a steal. The only thing better was getting it at $3 in early 2009.
Tangible book value is $11.12 per share. Even after today’s big run, shares still trade at less than $7. That assumes $5 a share of set asides. Shares should trade much higher than tangible book. In addition, it’s growing each quarter. If you had a company that was trading 37% below its net asset value, with a strong franchise, growing revenue and earnings, and the possibility of a threat of a capital raise, you would buy it in a heartbeat. I don’t care what some of the other bloggers say. Stories have been planted by hedge fund managers. People hate Bruce Berkowitz and want to show him up. None of this has anything to do with the actual value of the bank. Bank of America should be as strong of a buy as can be at this price. People will be talking about buying it at this price years from now and other people will be talking about how scared they were of a threat that didn’t even exist.
Let me add this political jab to my commentary above: CEO Brian Moynihan has every reason in the world to blame Ken Lewis for the Countrywide purchase. I’ve never once heard him do this. Moynihan is showing leadership and, I believe, is doing a good job. Make your own decisions about the other national figure who refuses to take responsibility and lead, but instead continues to blame his predecessor and whoever else he can.
Speaking of Bank of America’s past, John Thain made a big purchase yesterday of CIT shares. You’ll remember that Thain took over as CIT emerged from bankruptcy. You may also remember, if you read David Einhorn’s quarterly letters closely, that Einhorn sold out of CIT after it came out of bankruptcy because he was unhappy that management was not being shareholder friendly.
I’m going to close today’s edition with a quote from Saj Karsan’s Twitter page that made me laugh, “CNBC Fast Money's Tim Seymour argued today that gold is not a bubble. He was succeeded by a 30 second national ad for gold metal detectors.”
Disclosure: Long BAC