John Paulson, the billionaire whose biggest hedge fund has lost 31 percent this year, cut his stake in Bank of America Corp. (BAC) stock by half and trimmed his Citigroup Inc. (C) position last quarter as financial shares slumped.
Paulson & Co. sold 7.8 million shares of New York-based Citigroup, leaving the fund with 33.5 million shares as of June 30, according to a filing today with the U.S. Securities and Exchange Commission. The fund sold 63.2 million shares of Charlotte, North Carolina-based Bank of America, leaving it with 60.4 million, according to the filing.
Paulson, 55, who has been betting on an economic recovery by the end of 2012, scaled back those wagers after losses this year and told clients in June that he reduced his stake in Bank of America, which slumped 18 percent in the second quarter and 29 percent since then. Financial shares, including Citigroup, were among the fund’s biggest U.S. stock holdings in the first half of the year and have been a major part of his recovery bet.
Financial companies posted the worst performance among 10 industry groups in the Standard & Poor’s 500 Index in the second quarter, losing 6.3 percent.
Armel Leslie, a spokesman for New York-based Paulson, declined to comment on the filing. The hedge fund oversees about $35 billion in assets.
Bank Warrants
Paulson also trimmed its holdings of two types of long-term warrants tied to Bank of America’s bailout under the U.S. Treasury Department’s Troubled Asset Relief Program. The hedge fund reduced its stake in the bank’s Group A warrants by 2 percent in the second quarter and held 29.4 million of the securities as of June 30. Paulson cut the number of Group B warrants by 3.2 percent to 9.68 million.
The hedge fund increased its stake in Wells Fargo & Co., the San Francisco-based lender, to 33.6 million shares from 20.5 million at the end of the first quarter, according to the filing. Paulson reduced its stake in JPMorgan Chase & Co. to 4.7 million shares as of the end of June.
Paulson’s investment in the bullion-backed SPDR Gold Trust remained unchanged in the second quarter. The hedge fund held 31.5 million shares as of June 30, according to the filing. The holdings are used for the hedge fund’s gold-denominated share classes, which have outperformed the dollar classes this year.
Paulson trimmed his stake in Johannesburg-based AngloGold Ashanti Ltd. by selling 1.1 million American depositary receipts, holding 39.9 million at the end of the quarter. The company remained the hedge fund’s biggest investment after the SPDR Gold Trust. Paulson sold his stake in Canadian miner Kinross Gold Corp.
Transocean Stake
Paulson also decreased its stake in Transocean Ltd., the world’s largest offshore driller, according to the filing, holding 18.8 million shares in the New York-listed company as of June 30. Paulson owned 24.5 million shares of the Zug, Switzerland-based company at the end of the first quarter.
The hedge fund trimmed its stake in Hewlett-Packard Co., the Palo Alto, California-based computer maker, to 23.5 million from 25 million at the end of March, according to the filing.
Paulson bought new stakes in Life Technologies Corp., Savvis Inc. and News Corp., according to the filing.
The firm left about 45 percent of its holdings unchanged.
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.
Growth Wager
Paulson told investors at the start of the year that U.S. economic growth would probably continue in 2011, and that over the past 20 years, the average length of expansion after each of the previous two recessions had been 32 quarters. The wager has hurt him so far this year.
Paulson’s Advantage Plus Fund, which tries to profit from corporate events such as takeovers and bankruptcies, lost 11 percent in the first week of August, a person familiar with the firm, who asked not to be identified because the information is private, said last week. Paulson would have to return about 45 percent in the remainder of the year to break even in that fund.
-- With assistance from Peter Eichenbaum in New York. Editors: Steven Crabill, Larry Edelman, Josh Friedman
To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel atcbaumgaertel@bloomberg.net
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