According to Paulson & Co internal documents John Paulson is thinking soon to be CEO-less BofA will be worth three times what he bought it for in two and a half years time. Yesterday, Bloomberg reported JP’s been telling his investors Bank of America still has considerable upside and room to double in value.
But according to documents we saw, JP started telling investors in July he got into this trade with the expectation the stock would more than triple by the end of 2011.
As first reported by Chris Gillick in the September issue of AR magazine, Paulson’s cost basis for his huge-ass BofA position was $9. Using a conservative P/E multiple of 10, and a 2011 earnings per share estimate of $3, Paulson’s analysis estimates $BAC should be worth $30 at the tail end of 2011. In other words, pay no attention to JP taking a mere 8.2 million shares off his 168 million position in the third quarter.
Given that some of you might make your own estimate off of JP $3 EPS prediction here’s how Team Paulson does the math via his marketing material:
When asked if JP’s bullish view on the bank was realistic Timothy Connolly of Sconset Capital said, “That’s entirely possible. In fact if BofA does manage to get out of the weeds they may buyback a boatload of stock and earnings per share could be even higher.” If you really think they’ll be out the weeds and estimated 15x a $3 EPS, the stock could reach $45 at the beginning of 2012.
Paulson’s spokesman declined to comment on the investment. While King Cohen has pretty much given up BofA, we don’t expect JP to be selling out of his entire stake any time soon.
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Any chance of getting the full quarterly letter he wrote?
Bernanke is holding rates artificially low with precisely this objective in mind. The Kilimanjaro-steepness of the yield curve is designed to bail out the financial sector by earning the balance sheet back into health.
In 1H09 BAC’s deposits & fed funds went to $1.163tr from $978b in 1H08, yet interest expense went DOWN from $15.3b to $8.2b.
You can’t fuck with that.
this is the same propaganda warren b (not to be confused with “g”) was spewing on wells, but with a slightly different spin…the banks will earn their way out of the hole.
while I agree with @negconvex that in a steep curve environment, you have to work hard to lose money, there is another factor at play: atrophy. QoQ bac is losing (non-interest bearing) deposits and revenues, down 1% and 20%, respectively. so the question is: are those normalized numbers reflective of the “new” bac reality?
bottom line: the franchise is broken and the mothership needs a leader to repair its image – until then, it’s dead money aside from hedgies talking up their book to move the stock.
WOOLY BUHLY!
Teri Buhl, I find you très intrigant.
Nice get Buhl. Heck- why didn’t that Bloomberg story tell us this whole growth prediction is about Paulson thinking BofA can get to $3eps.
Once again Dealbreaker beats major media.
@1 this report looks like they got the news from marketing material used to raise money and not an investor letter.
Since we’ve seen the WSJ and the NYT Dealbook steal Dealbreaker’s investor letter news and source it as their own – I think they shouldn’t post them any longer. It sucks for DB’s readers but also might make major pubs man up and realize Bess and Teri break original news and should be recognized for it.
You rock DB – great info I didn’t read elsewhere. Way to keep your edge.