Paulson Sells Citigroup And Bank of America, Accumulates Gold Miners In Q4 2011

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Includes: BAC, C, GLD, HIG, HPQ
by: Zvi Bar

John Paulson, billionaire hedge fund manager of Paulson & Co., is well known for betting against subprime mortgages before they collapsed, and buying banks after their collapse. In 2010, Paulson earned a record amount of money for managing a hedge fund on the back of large bets on gold and banks, and an increased client-base.

In 2011, Paulson & Co.'s funds had their issues, including poor performance by the financial sector and the negative news that the hedge fund was a significant investor in Sino Forest, a Chinese timber and wood company that was accused of fraud and which is still under scrutiny. Paulson subsequently spent much of 2011 selling various financials, Sino Forest and some gold. Q4 of 2011 was no different.

According to Paulson's 13F, filed on February 14, 2011, the fund liquidated its positions in both Bank of America (NYSE:BAC) and Citigroup (NYSE:C). Paulson owned about 25 million shares of Citigroup, worth about $640 million, Paulson also sold $394 million worth of Bank of America, or 64.3 million shares. It also sold nearly 1 million shares of BlackRock, valued at just under 150 million.

Bank of America and Citibank were two of the investments that Paulson started accumulating at the 2009 bottom. These investments were among his largest equity investments. Paulson manages about $24 billion. Paulson's financials helped make his 2009 and 2010, and ruined his 2011. Paulson reduced his position in Hartford Financial Services Group (NYSE:HIG), though he still owns about eight percent of the company.

Selling these large financials means Paulson has not benefitted from their recent appreciation. Since the start of 2012, Citigroup is up about 24 percent and Bank of America is up 45 percent. Paulson also sold out of Hewlett-Packard (NYSE:HPQ), having held about $340 million worth of the tech large-cap.

Paulson & Co. also again reduced its position in the SPDR Gold Trust ETF (NYSEARCA:GLD) by 3 million shares. The fund still held 17.3 million shares at the end of 2011, worth about 2.85 billion. GLD has been Paulson's largest single equity holding since 2010, and gold continues to be a theme in Paulson's overall portfolio.

Paulson's filing also indicated it reduced investment in AngloGold Ashanti (ANG), its primary gold miner investment and second largest equity holding, while adding to numerous smaller gold-miner positions. Much of Paulson's sales may be related to investors exiting certain funds and required. Some may have exited poor performing financial oriented funds, while others may have realized some gains on the gold fund. Another possibility is that Paulson is allocating a more diversified gold-miner allocation due to recent underperformance versus gold.

Disclosure: I am long BAC, C.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice, as it does not take into account your specific situation or objectives.