Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.
John Paulson, hedge fund billionaire of Paulson & Co that capitalized on the problems in mortgage backed securities, a few days ago addressed a Global Financial Services Conference hosted by UBS. The notes below are being circulated among traders. The original source is not known, but this version comes courtesy of Business Insider – Clusterstock.
In short, Paulson is bullish on financials and gold, confident about the recovery, and thinks housing will be stable by 2012.
The following are a few bullets on his talk:
- Believes financials are under-followed at present whilst earnings are recovering.
- Confident US recovery is going to continue. One weak segment impeding growth is housing. However transition rate of delinquencies has dropped, i.e pool of delinquent mortgages is declining.
- Expect normal housing market by 2013.
- Assuming 7% S&P earnings and a normalized market PE, there is 34% upside.
- Financials’ earnings expected to recover strongly as provision expenses decline.
- Sees 40–60% upside in bank stocks.
- Sees US banks as better capitalized an over-reserved vs European once, hence only European holding is Lloyds.
- Doesn’t see any good shorting opportunities in financials.
- Expect to see pick-up in M&A in financials, particularly cross-border.
- Doesn’t think gold is a crowded trade. Only a small portion of pension fund assets held in gold.
Source: Business Insider – Clusterstock, May 10, 2011.
John Paulson’s take on markets was first posted on May 12, 2011 at 9:30 am.
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