NEW YORK (
) -- Although Warren Buffett's
sold its entire investment in
Bank of America
during the fourth quarter, several prominent hedge fund managers added to their holdings of the nation's largest bank.
While it wasn't a very large position relative to the size of Berkshire Hathaway's total portfolio, the sale of all 5 million shares it was holding signaled a lack of confidence, as Bank of America navigates through the mortgage mess, including $4.1 billion in fourth-quarter provisions for mortgage claims, including $3 billion for potential and future claims by
for Countrywide mortgages sold to the government-sponsored mortgage giants through 2008.
Bank of America acquired Countrywide in July 2008.
In a report published after the holding company announced its fourth-quarter results, Richard Staite of Atlantic Equities said that potential losses from buyers of private-label mortgage-backed securities issued by Bank of America and Countrywide "remain a considerable uncertainty," adding that "litigation reserves were increased by $1.5bn in Q4, however the bank admitted there could be a further $7bn to $10bn in charges in future years."
Bank of America's shares closed at 14.18 Tuesday, up 6% year-to-date, but down 2% from a year earlier. The shares trade for 7.6 times the consensus 2012 earnings estimate of $1.86 among analysts polled by Thomson Reuters.
While this is the lowest valuation to forward earnings among the "big four" U.S. banks, all are trading quite cheaply on that basis. The forward P/E was 8.2 for
based on Tuesday's closing price of $46.01 and a consensus 2012 earnings estimate of $5.59 a share for 2012. For
, the forward P/E was 8.8, based on Tuesday's closing price of $4.69 and the consensus 2012 earnings estimate of 53 cents a share.
was trading at a forward P/E of 8.9, based on Tuesday's close at $31.38 and a 2012 consensus earnings estimate of $3.52 a share.
Despite the market pessimism, the majority of sell-side analysts still like Bank of America, with 16 out of 25 analysts rating the shares a buy, and the rest rating them a hold.
In addition to Berkshire Hathaway, sellers of Bank of America during the fourth quarter included John Paulson's
Paulson & Co.
, which sold 13.9 million shares during the fourth quarter, trimming its position by 10% to $123.9 million shares worth $1.7 billion as of December 31, and making up 5% of Paulson's total portfolio.
largest position at year-end according to Capital IQ was 31.5 million
SPDR Gold Shares
, worth $4.4 billion at the end of 2010 and making up 14% of Paulson's portfolio. During the fourth quarter, Paulson also trimmed his holdings in Citigroup, while adding to his stake in
bought 1.1 million Bank of America shares during the fourth quarter, bringing its stake up to 1.2 million shares, which was a very small portion of the money manager's total portfolio. Soros's largest position at the end of 2010 was 4.7 GLD shares worth $655 million as of December 31.
Other hedge funds buying Bank of America shares during the fourth quarter included
, which purchased 2.6 share to increase its stake in the company to 25.1 million shares worth $334 million as of December 31, or 8% of the investment manager's total portfolio. Appaloosa also bought 66.3 million Citigroup shares during the fourth quarter, more than doubling its stake to 117.5 million shares worth $556 million as of December 31.
increased its stake in Bank of America by 21.5 million shares to 92.1 million shares worth $1.2 billion, or 7% of the total Fairholme portfolio as of December 31. Fairholme's largest position at year-end was 44.3 million shares of
American International Group
, which was worth $2.6 billion, or 15% of the total portfolio, according to Capital IQ. Fairholme added 21.5 million AIG shares during the fourth quarter.
Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.