John Paulson’s Advantage Fund is reportedly down 6% in May, according to Reuters. Paulson is famous for his record $3.7 billion profit betting against subprime mortgages in 2007 and subsequent years of stellar returns. Though details are not available, several of his largest financial holdings have declined and could be weighing down his portfolio. In the first quarter, his Advantage Fund lost 1.24% and his Advantage Plus Fund lost 1.74%, CNBC reported. His other funds performed well, however – some gained from 3.8% - 6.4%.
In his 2010 annual letter, Paulson said he was expecting the US economy to improve in 2011. After investing heavily in distressed assets over the last year and a half, he said he believes “Now that these companies have repaired their capital structures, their equity offers substantial upside appreciation relative to downside risk as we move toward normalization.” Paulson’s hoped-for economic normalization has not yet materialized.
However, Paulson made billions off of recovering financials in 2009 after conducting comprehensive analyses to predict future prices. Thus, it is possible that his recent bets on financials may prove more successful over the long term.
Most of John Paulson’s stocks have declined in the second quarter, as the above graph demonstrates, and only a few of his largest holdings have gained. The hardest hit stocks are those in the financial and oil sectors. His largest holding, SPDR Gold Trust (GLD, Financial), has gained, which will help his gold fund. Last year, his gold fund returned 35%.
CitiGroup (C, Financial)
Citigroup Inc. was Paulson’s largest holding in 2010 and his most profitable bank position – it gained 43% in 2010, and he made over $1 billion from it since mid-2009. In the first quarter, Paulson sold 80,344 shares, putting a small dent in his stake of 41,272,220 shares. Despite its long climb upward, Citigroup shares declined over 10% in May, and about 20% year to date.
The stock prices are dipping primarily because government support is no longer guaranteed due to the Dodd-Frank Act, causing ratings agencies such as Moody’s to reconsider their ratings on major financials. On May 6, it implemented a 1-for-10 reverse stock split, but the stock fell almost $5 anyway and even further in June.
Citigroup posted free cash flow of $35.9 billion in 2010, but the last several years have been volatile: In 2009, they lost $50.6 billion, in 2008, they gained $118 billion, and in 2007, they lost $71.2 billion. The bank has cash of about $750 billion, and long-term liabilities and debt of $1.8 trillion.
The government sold its 2.4 billion share stake in Citigroup for $4.45 per share, or $10.5 billion, at the end of 2010, putting an end to all government assistance to the bank.
Bank of America (BAC, Financial)
Bank of America’s stock is trading at near 52-week lows in June, after falling 4% in May and 18% year to date. The bank posted income of $2.1 billion in the first quarter 2011, the first positive quarter since the third quarter of 2010. In 2010, the bank lost $2.3 billion, its only negative year in the last ten.
In the first quarter, the company benefited from lower credit costs, gains from equity investments, higher asset management fees and investment banking fees. However, it also faced higher legacy mortgage-related costs, higher litigation expenses and lower sales and trading revenue after record levels a year ago. Bank of America declared a quarterly dividend of $0.01 per share in May.
In 2009, Paulson predicted that by the end of 2012 the bank would have earnings of $3 per share. The stock would then be worth $30 per share using a 10x multiple. Paulson bought the stock in the second quarter of 2009 at about $10 per share and currently owns 123,634,429 shares.
Hartford Financial Services (HIG, Financial)
Hartford Financial Services, Paulson’s seventh largest holding and third largest financial holding, fell 8% in May. Hartford Financial Services is a 200-year-od insurance and wealth management Fortune 100 company with a market cap of $11 billion.
Paulson bought the stock in the third quarter of 2009 when it traded at almost $20 per share, and more in subsequent quarters when it approached $26 per share. The stock declined 11% in May, and is down 6% year to date.
Hartford Financial announced it will sell Federal Trust Corporation, the small bank it bought in June, 2009, to qualify for the government’s TARP program, which was only available to banks. The sell is expected to be complete by the fourth quarter 2011, and will show an approximate $70 million after-tax charge for the divestiture in its second-quarter financial report.
CenterState, the bank’s buyer, will assume its deposits totaling approximately $230 million and will purchase selected performing loans totaling about $170 million (at a 27% discount), and other assets.
The company is also trying to sell its mutual-fund unit, which has about $104 billion in assets, reports Reuters. Investors are worried about losses in its Japan unit after the multiple disasters in the country.
Transocean (RIG, Financial)
Paulson’s third largest holding Transocean Ltd. comprises 5.56% of his portfolio. The stock fell 7% year to date as crude oil prices, which had been climbing for the last year, dropped dramatically in May.
Transocean’s earnings per share declined in 2010 to their lowest levels since 2004, at $3.01 per share. In the fourth quarter 2010, they reported a loss per share of $2.50 and a net loss of $799 million. Free cash flow, however, reached a 10-year high in 2010.
AngloGold Ashanti Limited (AU, Financial)
AngloGold Ashanti shares fell over $4 in May, but the stock price has been volatile. Over the last year, it has gained 2.7%, and 142% over the last 10 years.
Paulson bought AngloGold in the first quarter of 2009 when it was at $30 per share, and it is now 5.7% of his portfolio.
Currently, gold prices are within 2% of their all-time high of $1,577.40.
Paulson’s May performance declines do not include the major loss incurred from the recent reports about Chinese timber company Sino-Forest, of which he owns 35 million shares. The stock plunged 71% the first few days of June after short seller Muddy Waters issued a report accusing the company of misrepresenting its land holdings, funding itself on securities sales, and essentially being a big Ponzi scheme. Analysts speculate that the report cost Paulson about $450 million.
In his 2010 annual letter, Paulson said he was expecting the US economy to improve in 2011. After investing heavily in distressed assets over the last year and a half, he said he believes “Now that these companies have repaired their capital structures, their equity offers substantial upside appreciation relative to downside risk as we move toward normalization.” Paulson’s hoped-for economic normalization has not yet materialized.
However, Paulson made billions off of recovering financials in 2009 after conducting comprehensive analyses to predict future prices. Thus, it is possible that his recent bets on financials may prove more successful over the long term.
Most of John Paulson’s stocks have declined in the second quarter, as the above graph demonstrates, and only a few of his largest holdings have gained. The hardest hit stocks are those in the financial and oil sectors. His largest holding, SPDR Gold Trust (GLD, Financial), has gained, which will help his gold fund. Last year, his gold fund returned 35%.
CitiGroup (C, Financial)
Citigroup Inc. was Paulson’s largest holding in 2010 and his most profitable bank position – it gained 43% in 2010, and he made over $1 billion from it since mid-2009. In the first quarter, Paulson sold 80,344 shares, putting a small dent in his stake of 41,272,220 shares. Despite its long climb upward, Citigroup shares declined over 10% in May, and about 20% year to date.
The stock prices are dipping primarily because government support is no longer guaranteed due to the Dodd-Frank Act, causing ratings agencies such as Moody’s to reconsider their ratings on major financials. On May 6, it implemented a 1-for-10 reverse stock split, but the stock fell almost $5 anyway and even further in June.
Citigroup posted free cash flow of $35.9 billion in 2010, but the last several years have been volatile: In 2009, they lost $50.6 billion, in 2008, they gained $118 billion, and in 2007, they lost $71.2 billion. The bank has cash of about $750 billion, and long-term liabilities and debt of $1.8 trillion.
The government sold its 2.4 billion share stake in Citigroup for $4.45 per share, or $10.5 billion, at the end of 2010, putting an end to all government assistance to the bank.
Bank of America (BAC, Financial)
Bank of America’s stock is trading at near 52-week lows in June, after falling 4% in May and 18% year to date. The bank posted income of $2.1 billion in the first quarter 2011, the first positive quarter since the third quarter of 2010. In 2010, the bank lost $2.3 billion, its only negative year in the last ten.
In the first quarter, the company benefited from lower credit costs, gains from equity investments, higher asset management fees and investment banking fees. However, it also faced higher legacy mortgage-related costs, higher litigation expenses and lower sales and trading revenue after record levels a year ago. Bank of America declared a quarterly dividend of $0.01 per share in May.
In 2009, Paulson predicted that by the end of 2012 the bank would have earnings of $3 per share. The stock would then be worth $30 per share using a 10x multiple. Paulson bought the stock in the second quarter of 2009 at about $10 per share and currently owns 123,634,429 shares.
Hartford Financial Services (HIG, Financial)
Hartford Financial Services, Paulson’s seventh largest holding and third largest financial holding, fell 8% in May. Hartford Financial Services is a 200-year-od insurance and wealth management Fortune 100 company with a market cap of $11 billion.
Paulson bought the stock in the third quarter of 2009 when it traded at almost $20 per share, and more in subsequent quarters when it approached $26 per share. The stock declined 11% in May, and is down 6% year to date.
Hartford Financial announced it will sell Federal Trust Corporation, the small bank it bought in June, 2009, to qualify for the government’s TARP program, which was only available to banks. The sell is expected to be complete by the fourth quarter 2011, and will show an approximate $70 million after-tax charge for the divestiture in its second-quarter financial report.
CenterState, the bank’s buyer, will assume its deposits totaling approximately $230 million and will purchase selected performing loans totaling about $170 million (at a 27% discount), and other assets.
The company is also trying to sell its mutual-fund unit, which has about $104 billion in assets, reports Reuters. Investors are worried about losses in its Japan unit after the multiple disasters in the country.
Transocean (RIG, Financial)
Paulson’s third largest holding Transocean Ltd. comprises 5.56% of his portfolio. The stock fell 7% year to date as crude oil prices, which had been climbing for the last year, dropped dramatically in May.
Transocean’s earnings per share declined in 2010 to their lowest levels since 2004, at $3.01 per share. In the fourth quarter 2010, they reported a loss per share of $2.50 and a net loss of $799 million. Free cash flow, however, reached a 10-year high in 2010.
AngloGold Ashanti Limited (AU, Financial)
AngloGold Ashanti shares fell over $4 in May, but the stock price has been volatile. Over the last year, it has gained 2.7%, and 142% over the last 10 years.
Paulson bought AngloGold in the first quarter of 2009 when it was at $30 per share, and it is now 5.7% of his portfolio.
Currently, gold prices are within 2% of their all-time high of $1,577.40.
Paulson’s May performance declines do not include the major loss incurred from the recent reports about Chinese timber company Sino-Forest, of which he owns 35 million shares. The stock plunged 71% the first few days of June after short seller Muddy Waters issued a report accusing the company of misrepresenting its land holdings, funding itself on securities sales, and essentially being a big Ponzi scheme. Analysts speculate that the report cost Paulson about $450 million.
