Bear stock sales late-'07 helped cut Putnam loss

By Muralikumar Anantharaman

BOSTON (Reuters) - Putnam Investments, battered by redemptions and poor performance, appears to have made a good move in late 2007 as it dumped Bear Stearns' stock while some of the most revered U.S. stock pickers were hoarding it.

The fund manager, Bear's biggest shareholder as of end-June, sold two-thirds of its stake in the Wall Street firm then and appears to have sharply cut losses that some rivals may be facing.

Putnam sold 4.43 million Bear Stearns Cos Inc BSC.N shares out of its total holdings of about 6.7 million shares of the stricken firm sometime in the fourth quarter of 2007, according to Reuters Knowledge, based on end-December filings.

At the end of June, Putnam had a 6 percent stake in Bear, or 7.03 million shares. As of end-December, it owned 2.24 million shares and was Bear's 10th largest institutional shareholder. Putnam is a unit of Canada's Power Financial Corp (PWF.TO).

"They sold a majority of their stake in the fourth quarter. So given the recent turn of events that was smart. But I'm sure they still sold at a loss, nonetheless," said Wenli Tan, a mutual fund analyst at Morningstar Inc.

Bear shares plunged Friday and Monday as the investment bank faced a capital squeeze. It agreed on Sunday to be bought by JPMorgan Chase & Co (JPM.N) for $2 per share. Bear shares ended up 22.9 percent at $5.91 on Tuesday.

That's still a far cry from the $122.30 to $88.25 range the stock traded in during the fourth quarter of 2007.

Boston-based Putnam declined to comment on its holdings.

Data show that Legg Mason Capital Management, a unit of U.S. money manager Legg Mason Inc (LM.N) run by star stock picker Bill Miller, raised its exposure by 30 percent to 5.7 million shares in late 2007, while Morgan Stanley (MS.N) unit Van Kampen Asset Management raised it by 83 percent to 4.3 million shares.

REDEMPTIONS

Based on Tuesday's stock price for Bear, Putnam could have seen its holdings of the investment bank decline by about $185 million in value while Legg Mason Capital could have lost about $470 million. Legg declined to comment on Miller's Bear Stearns stake.

Van Kampen said on its Web site as of March 14, its mutual funds "held no positions in Bear Stearns equity securities."

Barrow, Hanley, Mewhinney & Strauss Inc, a U.S. subsidiary of London-listed insurer and asset manager Old Mutual PLC (OML.L), and billionaire British investor Joseph Lewis appear to be taking hits of more than $900 million each on their stakes because of Bear's tumble.

The $9.9 billion Fund for Growth and Income, Putnam's biggest, sold 1.4 million Bear shares late in 2007, data show. The fund is down 15.6 percent in 2008 through Monday's close against a negative 12.60 percent return for the S&P 500 index, according to Lipper data.

The fund has also underperformed the index over 1, 3, 5, 10 and 15 years, the data show.