John Marshall Mantel for The New York TimesHoward S. Marks, Oaktree Capital Management’s chairman.Amid falling profits, large layoffs and fears of looming regulation, Wall Street banks needed all the friends they could get in 2011. And in the fourth quarter, they found at least one group willing to stand on their side: some of the world’s largest hedge fund managers.
This week’s 13-F bonanza, the quarterly occurrence in which large hedge funds must file a list of their stock holdings for the previous quarter with the Securities and Exchange Commission, revealed that several large hedge funds took or increased their stakes in Wall Street bank stocks during the fourth quarter of 2011, betting the industry would recover and send stock prices upward.
Large banks, hammered by weak deal revenue and the specter of looming regulation, saw their stock prices slide in 2011. Shares of Bank of America alone fell more than 50 percent during the calendar year. But in the fourth quarter, banks’ fortunes improved slightly, and a number of large fund managers took notice.
Oaktree Capital Management, the California hedge fund started by Howard S. Marks, increased its positions in financial stocks by 3.7 percent in the fourth quarter, according to data from the company’s S.E.C. filing compiled by Bloomberg. Fairholme Capital Management, the fund run by Bruce R. Berkowitz, increased its financial stock positions by 3.1 percent, making money on investments in JPMorgan Chase and Wells Fargo as those banks’ stocks recovered from their autumn lows.
Tiger Management picked up Wells Fargo shares, too, on its way to a 15.3 percent increase in its financial stock holdings, while Bridgewater Associates opted for shares in Goldman Sachs and Bank of America, according to those funds’ filings. (Bridgewater is a global macro fund, and buys comparatively few individual stocks.)
Eton Park Capital Management, a fund started by a former Goldman Sachs trader, Eric Mindich, took a new stake of 20 million shares in Bank of America, and added shares to its existing Citigroup stake, and the Tudor Investment Corporation, a fund run by the Connecticut investor Paul Tudor Jones, picked up a small stake in Bank of America.
Of course, when some hedge fund managers zig, others zag.
Fairholme sold 22.8 million shares in Citigroup, and reduced the size of its Bank of America stake, according to its 13-F filing. And Eton Park, which liked Bank of America, sold all 2.4 million of its JPMorgan Chase shares, while reducing its stake in Morgan Stanley by 9.75 million shares.
Paulson & Company, the fund run by John A. Paulson, reduced its exposure to the financial industry by more than 6 percent over all, according to Bloomberg. The fund, which had its worst year on record in 2011, sold 23.4 million shares of Wells Fargo stock during the quarter and got rid of its entire 64-million-share stake in Bank of America.
Most managers wait the legally allowed maximum of 45 days after the end of the quarter to file their 13-F disclosures, meaning that the filings are, at best, imperfect snapshots of a fund’s current holdings.
But those who have held onto their long positions in financial stocks have likely made big gains. All five of the largest American banks have seen their stock prices rise in 2012, and Bank of America, last year’s black sheep, is up more than 40 percent.