Thursday 7 March 2013

Louis Bacon Beats the Odds


Hedge Fund manager and billionaire Louis Bacon knows what he’s talking about when it comes to investing in banks. A large section of his portfolio, more than 25% in fact, was invested in the financial sector at the end of 2012. The reputation knocks many big name banks have experienced in recent years has not seemed to sway the cunning Bacon from investing, with many of his top choices including big name banks.
The second largest holding in Louis Bacon’s portfolio is Citygroup. Already alarm bells could be ringing for many as Citigroup’s revenue from 2012 was down 10% year over year. However, seasoned professionals like Bacon know that loans for Citigroup were up by 1.3% and revenue 3.3%. Moreover, Citigroup also created $1.33 billion of income from its procedures throughout 4Q 2012, which demonstrates a raise of 34% year over year.
What’s more, international areas of operation for this bank saw income growth as well. North America achieved 121% year over year, Latin America achieved 16%, and Europe, Asia and the Middle East grew by 6%
Citigroup made astonishing progress in the quarter 4Q, with a net interest margin rise to 2.93%, despite it previously being 2.86% in the third quarter.
Another of Louis Bacon’s success stories is in his investment in Bank of America, which provided him with one of his biggest increases in the last quarter. This saw his stake upped by 100%, making Bank of America the third largest of Louis Bacon’s holdings.
It seems strange then that hedge fund manager Louis Bacon would choose to invest in Bank of America and Citigroup, two of the banks which suffered some of the worst hits in the financial crisis, especially since Bank of America went down by 68% and Citigroup by 80% over the course of the last five years. These are incredibly disconcerting figures considering Well Fargo and JPMorgan Chase only dropped by 14% and 3% respectively during the same time period.
However, Bank of America has managed to improve its status no end since the end of the last quarter. The Tier 1 common capital ratio of Bank of America was 11%, which is a very good sign and an admirable mark up from 9.86% in the same quarter the year before.
It seems that thus far Louis Bacon’s expertise in the field has paid dividends and needless to say the shrewd tactics of this great hedge fund manager will be under close observation in the near future.



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