Paulson & Co. Q3 2009

John Paulson's Hedge Fund Buys Citi Drops Goldman

John Paulson's hedge fund trades attract a lot of attention because of his ability to profit in downturns. Last year, Paulson made about $2 billion largely by betting that the housing market would crash and this year he has been taking big stakes in struggling banks. In Q2 2009, it was revealed that Paulson was purchasing significant shares of Bank of America and his fund's latest filing shows that he has bought 300 million shares of Citigroup.

In addition to his investment in partly government-owned banks, it's also interesting to see the stocks that Paulson has sold. Last quarter, Paulson sold his entire stake in Goldman Sachs and also sold shares in JPMorgan Chase & Co.

“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. Source

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