Hedge fund manager John Paulson loves to short stocks. He has made tens of millions of dollars for himself, and more for clients, betting that firms will self-destruct.
In a new filing with the SEC, Paulson discloses that he has gone long in a number of banks stocks. The most prominent position is in Bank of America (BAC). He now owns 168 million shares in the financial firm, which is about two percent of the outstanding stock.
Why does Paulson want into B of A stock? There could be a number of reasons. One is that it is possible most of the bad news is behind the bank. It is in the process of settling SEC charges involving its buyout of Merrill Lynch. Another reasons is that B of A chief Ken Lewis may be close to losing his job as a result of his blunders. That could move shares higher, at least for a brief period, depending on who replaces him.
Or, Paulson may have a much more simple reason for buying such a large piece of the bank. With the economy on the mend, he may believe that, despite future write offs on credit card debt and commercial real estate, that B of A has entered a new period of consistent profitability and that the trend will keep pushing its stock higher.
Douglas A. McIntyre is an editor at 24/7 Wall St.