Business IdeasPaulson takes Citigroup stake, sells Goldman Sachs shares
John Paulson disclosed that his hedge-fund group acquired 300 million shares of Citigroup during the third quarter, while selling its entire stake of Goldman Sachs Group Inc.
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The Citigroup holding, listed by New York-based Paulson & Co in a regulatory filing, marks his second billion- dollar-plus investment in a bank that received government bailout funds during the credit crunch. Paulson’s group bought 168 million shares of Charlotte, North Carolina-based Bank of America Corp in the second quarter.
Paulson, who earned some $2 billion last year in part by betting that the housing market would collapse, has invested in bank stocks that plunged during the 2008 financial crisis. He sold shares during the third quarter in Goldman Sachs and JPMorgan Chase & Co, while building a stake in a bank that remains partly owned partly owned by the government.
“If you are guided by what happened to these companies, you would have to think Citigroup is the most problematical of the major banks,” said Warren Marcus, who ran the bank research department at Salomon Brothers Inc during the 1970s. “Maybe there is a perception that Citi over time has got a better upside than some of the others.”
Armel Leslie, a spokesman for Paulson & Co, declined to comment on the holdings. The firm has about $29 billion under management that it invests in four strategies: merger arbitrage, event-driven trading, credit and financial services.
Paulson ranked second in fund-manager earnings last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 through wagers that subprime mortgages would sour. He started the Paulson Recovery Fund in 2008 to invest in financial firms hurt by mortgage writedowns.
Citigroup shares now trade at $4.05 each, quadruple the low of 97 cents that they hit in early March, yet below the peak of about $57 in December 2006. The number of common shares outstanding quadrupled to 22.9 billion in September.