John Paulson, the billionaire hedge fund manager who had his worst year on record in 2011, sold his entire stakes in Citigroup Inc. (C) and Bank of America Corp. in the fourth quarter before the shares rallied.
Paulson & Co., which owned $643 million worth of Citigroup at the end of the third quarter, had sold its entire 25.1 million shares as of Dec. 31, the firm said today in a filing with the U.S. Securities and Exchange Commission. Paulson also sold $394 million worth of Bank of America, or 64.3 million shares. It also sold its 998,900 shares of BlackRock Inc. (BLK) valued at $146 million.
Citigroup and Bank of America, stakes that Paulson had started aggressively building in 2009 as part of his bet that the U.S. economy would recover by the end of this year, were among Paulson’s biggest U.S. stock holdings in 2011. Paulson, which is based in New York and manages about $24 billion, saw its weighting in financial services companies decline by 6.7 percent, the most of any industry group during the quarter, according to data compiled by Bloomberg.
“I can’t believe what he has done,” said Vidak Radonjic, managing partner at Beryl Consulting Group LLC in Jersey City, New Jersey, which advises clients on investing in hedge funds. “This is not quite John Paulson, who normally sticks to his strongest convictions. It seems that he’s been under immense pressure from investors to reduce his exposures.”
The firm’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, lost 51 percent in 2011. Shares of financial service companies were the “primary drag” on the fund’s performance, the firm said in a third-quarter letter to investors in October, a copy of which was obtained by Bloomberg News.
Shares of financial services companies in the Standard & Poor’s 500 Index have rallied 20 percent this year. Paulson & Co.’s exits mean the firm missed Citigroup’s 22 percent gain and Bank of America’s 44 percent surge year to date.
Armel Leslie, a spokesman for Paulson & Co., declined to comment on the firm’s filing.
Paulson & Co. cut its stake in the SPDR Gold Trust (GLD) exchange-traded fund, which is backed by the precious metal, to 17.3 million shares in the fourth quarter from 20.3 million shares at the end of the third quarter. Paulson uses the SPDR Gold Trust, his largest holding, for the fund’s gold- denominated share classes. The firm also trades bullion and gold derivatives, which aren’t included in its regulatory filings.
As Paulson trimmed its second-largest position in AngloGold Ashanti Ltd. (ANG) by 2.4 million American depositary receipts, leaving him with a 34.3 million stake, he added to other holdings in gold miners, including NovaGold Resources Inc., Randgold Resources Ltd. (RRS), Barrick Gold Corp. (ABX), Iamgold Corp. (IMG) and Agnico-Eagle Mines Ltd. (AEM)
The firm also sold out of its 15 million shares of Hewlett- Packard Co. (HPQ), valued at $341 million, in the quarter.
Paulson controls one of the largest stakes in Hartford Financial Services Group Inc. (HIG) and cut 1.4 million shares, leaving him with a 37.5 million stake. Paulson filed a document today with regulators so he can approach other investors about his plan to break up the insurer.
Money managers who oversee more than $100 million in equities must file a Form 13F within 45 days of each quarter’s end to list their U.S.-traded stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.
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