BofA stock hits 8-month high after ex-bear buys in
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Mega-hedge-fund manager John Paulson, who correctly bet heavily against the banking system in 2007 and 2008, now has become one of its biggest fans.
Or at least he was in the second quarter, when he snapped up 168 million shares of Bank of America Corp. and large stakes in several other major financial firms, according to filings made public after markets closed Wednesday.
News of Paulson’s stake in BofA helped drive the stock up $1.07, or 6.7%, to $17 on Thursday, the highest closing price since Dec. 8.
BofA has soared 441% from its 2009 low of $3.14 on March 6, when some investors were convinced the Obama administration was planning to seize the bank.
Paulson, who heads New York-based Paulson & Co., is considered one of Wall Street’s savviest players. He is estimated to have earned $2.5 billion last year thanks to bets against financial stocks and subprime mortgage bonds. He began shorting subprime securities in 2007 using credit default swaps.
But in the second quarter, with many financial issues leading the stock market’s dramatic rebound, Paulson loaded up. Besides BofA, he bought into Capital One Financial Corp., Regions Financial Corp. and Fifth Third Bancorp.
His 168-million-share stake in BofA as of June 30 made him the bank’s fourth-largest holder. He would have been buying in the second quarter at prices between $6.82 and $14.17, the low and high for the period.
The problem for investors who are piggybacking on Paulson is that it isn’t clear whether he believes BofA still is a buy at $17. His firm isn’t discussing the investments.
BofA’s stock is up 29% since June 30, compared with a 19.8% rise for the average stock in the Standard & Poor’s index of 79 major financial issues.
A much more recent vote of confidence in BofA came from Sallie Krawcheck, who was hired last week to head the bank’s global wealth and investment management unit, which includes Merrill Lynch’s army of brokers.
The 44-year-old Krawcheck, well known on Wall Street and most recently head of wealth management at Citigroup until last fall, bought 63,000 BofA shares Wednesday, according to a required filing she made Thursday with the Securities and Exchange Commission.
She paid $15.96 to $15.98 a share for the stock, for a total of just over $1 million.
But really, the only surprise would have been if Krawcheck hadn’t purchased a chunk of BofA shares to show her support, given that she’s an outsider landing in a position that could put her in line to succeed CEO Ken Lewis.
-- Tom Petruno