Wednesday, November 16, 2011

BAC: Both Sides of the Trade

Let's see how the world's top hedgies viewed Bank of America as an investment choice for the three months ending September 30.

John Paulson is nibbling again.

After cutting his stake by almost two-thirds in the year ending June 30, 2011, Paulson has added back 3.9 million shares since, despite seeing the value of his BAC holding decrease by over a quarter of a billion dollars in the third quarter alone.

He was buying from...

David Tepper, who sold his remaining 10 million shares.

Tepper at one point had over 30 million shares, but it's all gone now. The fund disclosures came on the same day that BofA announced that it was selling 10.4 billion shares of China Construction Bank for $6.6 billion. This was the second step in a two-stage liquidation. Less than three months earlier BofA had sold 13.1 billion shares of CCB for $8.3 billion. The after-tax gain for this latest transaction was $1.8 billion, or half the net from the earlier sale.

Hedge fund managers are not the only ones who play in the stock-market casino. So do members of Congress. CNBC reports that BAC is the third-most owned stock among that august group, trailing only General Electric and Procter & Gamble. Surely a stock loved by Congress critters is a buy, right? Right?

Yeah, right. I will fade that crowd every time.

[update, late Friday evening, 11-18-11--]

Bank of America is getting sued. Again. Not for mortgage fraud this time, but for underwriting risky bonds issued by the now-defunct MF Global without proper disclosure. Reuters has the story here. The plaintiffs are pension funds which, having bought said bonds, are now seriously underwater. MainePERS should take note and perhaps lawyer up as well. Successful damage suits would be one way to offset portfolio losses (that, plus the tried and true way of dunning taxpayers).

But wait. We own many of these miscreants, thanks to our brain-dead strategy of diversification. So we would be suing ourselves.

[Cue head-slap.]

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