10 Hedge Funds' Views on Bank of America

BOSTON ( The Street Ratings) -- Appaloosa Management, a top-performing hedge fund firm run by David Tepper, cut its bank-stock holdings by 15%, according to the most recent regulatory filing.

Tepper sold nearly 8 million shares of Bank of America ( BAC) in the first quarter, before the stock's decline accelerated. Bank of America has fallen 20% in the past three months, almost twice as much as that of rival JPMorgan ( JPM). Another competitor, Citigroup ( C), has dropped 16%.

What should you do? To gain perspective, here's what 10 other prominent hedge fund managers were doing as of March 31. And, afterward, hedge fund managers' and TheStreet Ratings' views of Wells Fargo ( WFC), whose shares have fallen the least among major banks.
David Tepper (Appaloosa Management)

Canyon Capital Advisors: Added 1.5 million shares, bringing its total position to 6.04 million shares, or a market value of $80.5 million.

Paulson & Co.: Paulson is the ninth-largest holder on record. The hedge fund firm, founded by namesake John Paulson, sold 226,000 shares, yet still holds $1.6 billion worth.

Goodman & Co.: Increased holdings by 65%, purchasing nearly 11.5 million shares.

Pzena Investment Management: The firm, run by Rich Pzena, added 322,000 shares, making for a total of 17.5 million shares.

Phil Gross' Adage Capital Partners: Trimmed nearly 7% of its stake by selling 1 million shares. Adage held $192 million worth.

Metropolitan West Capital: Reduced holdings by 31%, lowering its stake to $160 million.

King Street Capital: Quadrupled its position, adding 8 million shares, raising the total to $133 million.

Brookside Capital: Also added 8 million shares, tripling its position. Brookside held $157 million worth.

Benjamin Slavet's Ascend Capital: Initiated a new position of 7 million shares.

Citadel Advisors: Purchased 3.7 million shares, more than tripling its position. Citadel had $67 million in the stock.

While Tepper turned negative on Bank of America, the aforementioned hedge funds added about 26 million shares (or $350 million worth) during the quarter. TheStreet Ratings' quantitative model has a "hold" rating on shares of Bank of America. The primary factors are mixed. While the company has widened profit margins over time, the model is concerned with the deteriorating net income, poor debt management and disappointing return on equity.

TheStreet Ratings' model, however, likes Wells Fargo, which is rated "buy" with a $36.50 target, offering 27% upside from yesterday's close. Wells Fargo has many strengths, such as an impressive 20% annualized growth in earnings, nearly 100% expansion in operation cash flows in the past quarter and improving profit margins. Strengths outweigh weaknesses, notably the company's lackluster performance and above-average volatility over the past year.

Some notable hedge funds have been attracted by Wells Fargo's prospects. Maverick Capital bought an initial stake of 8.5 million shares, and Viking Global Investment Management started a position of 5.7 million shares. And John Paulson's Paulson & Co., which owns almost 21 million shares, didn't touch its Wells Fargo shares.
Equity research manager Chris Stuart, CFA, joined TheStreet Ratings after working as a senior investment analyst with Merrill Lynch covering small-cap equity and alternative investment strategies. Prior to that, Stuart worked for One Beacon Insurance as an actuarial analyst and at H&R Block as a financial adviser. Stuart earned his bachelor's degree in finance from the University of Massachusetts, Amherst. He holds a Chartered Financial Analyst (CFA) designation and is a member of the Boston Security Analysts Society (BSAS) and the CFA Institute.

If you liked this article you might like

Citigroup Gives CEO Corbat 48% Pay Raise as Profitability Misses Goal

Citigroup Gives CEO Corbat 48% Pay Raise as Profitability Misses Goal

Worst-In-Class Goldman Sachs CEO Blankfein Gets 9% Pay Raise

Worst-In-Class Goldman Sachs CEO Blankfein Gets 9% Pay Raise

Why Bank of America and Goldman Sachs Shares Are Perfect Inflation Hedges

Why Bank of America and Goldman Sachs Shares Are Perfect Inflation Hedges

Stock Market Volatility Leads to Frightened Investors: Bank of America Survey

Stock Market Volatility Leads to Frightened Investors: Bank of America Survey

JPMorgan, Bank Stocks Have Room to Run Higher in Slow-Motion Economy

JPMorgan, Bank Stocks Have Room to Run Higher in Slow-Motion Economy