May 18, 2010 / 1:01 AM / 10 years ago

UPDATE 2-Paulson bets big on banks, adds homebuilder

* Paulson adds homebuilder as he bets on housing recovery

* Extends bet on Bank of America (Adds details on fund managers’ holdings)

By Svea Herbst-Bayliss

BOSTON, May 17 (Reuters) - Hedge fund manager John Paulson, who correctly bet that housing prices would fall three years ago, is now betting that the market will come back soon and added a homebuilder to his portfolio while raising his stake in the country’s leading bank.

Paulson’s New York-based Paulson & Co raised its holdings in Bank of America (BAC.N), already one of his top 10, by 11 percent to 167.8 million shares, according to a regulatory filing released on Monday. The numbers detail the positions managers held at the end of the first quarter.

The Charlotte, North Carolina-based bank remained Paulson’s second-largest position, valued at $2.99 billion at the end of the first quarter.

Late last year, Paulson told investors that he expected Bank of America’s stock price to almost double in two years, expecting it to rise to $29.81. Shares closed at $16.35 on Monday.

Paulson’s holding in Citigroup, his third biggest, was unchanged at 506.7 million shares.

Perhaps most notably, Paulson bought 5 million shares in Beazer Homes USA (BZH.N), marking an unusual move among most hedge fund managers who concentrated more on financials and other big industries..

A week ago Paulson told investors that he expected to see a strong economic recovery plus a rebound in housing prices.

Last month, Paulson’s firm became drawn into the fallout surrounding Goldman Sachs’ civil fraud suit for misleading investors in a deal in which Paulson helped select mortgages and then bet that they would fail. Paulson’s firm was not accused of any wrong-doing by the government.

The fund manager kept his biggest position in SPDR Gold Trust, which was also unchanged at 31.5 million shares in the first quarter.

Late last year Paulson announced plans to make a big bet on gold by launching a new fund devoted to the precious metal.

During the quarter, Paulson raised his stake in AngloGold Ashanti Ltd to 43.7 million shares from 42.8 million.

Money managers are required to file form 13-F within 45 days after the end of each quarter. The forms include only U.S.-listed equity securities and related derivatives. Bonds, other securities and short positions are typically not disclosed. Managers may also leave off U.S.-listed equities they own under certain circumstances or file some holdings on confidential filings.

Paulson’s firm manages about $35 billion and the filing made on Monday shows about $21.2 billion in holdings.

The fund manager also bet big on casino owners on MGM Mirage and Boyd Gaming Corp during the first three months of the year. (Reporting by Svea Herbst-Bayliss, editing by Bernard Orr)

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