Intriguing Ideas From the Value Pros

 | Apr 09, 2014 | 2:00 PM EDT  | Comments
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Stock quotes in this article:

metr

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ibca

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visi

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hbnc

Last night, I caught up with the presentations from last week's Value Investing Congress in Las Vegas, via the Web. This year's spring event had a powerhouse lineup of money managers who tossed around some interesting ideas. Although no one should ever buy a stock just because of a recommendation, these stocks are worth considering. Just make sure you do your own homework before rushing out to buy a stock, no matter who recommended it.

I was pleasantly surprised to see that my friends at PL Capital spoke at the event. This is one of the best activist funds in the small-bank sector, and it has provided many ideas to help us benefit from the "Trade of the Decade" in bank stocks. Richard Lashley is one of the principals of the fund, and he raised some interesting ideas. PL Capital still likes the big-bank TARP warrants that expire in 2018. He specifically mentioned JPMorgan (JPM), Capital One (COF) and PNC (PNC) warrants as strong opportunities. I love these things, and they are at the top of my "buy in a pullback" list. As long as the world does not end between now and 2018, the warrants could provide spectacular long-term returns for patient, aggressive investors.

He gave attendees some small-bank ideas as well. The fund likes Metro Bancorp (METR) a Harrisburg, Pa.-based bank that has 33 branches and about $2.7 billion in total assets. PL Capital just filed a 13D on the bank disclosing a 5.2% stake in the Metro Bancorp. Lashley pointed out that the CEO is 73 years old, and Lashley is pretty confident that this bank will be sold in the near future.

He also still likes Intervest Bancshares (IBCA) the New York-based wholesale bank, which trades at 83% of tangible book value. He said here is a chance the bank will be kicked out of the Russell 2000 small-cap index, and if that happens, he would be a buyer on any weakness. He also likes Horizon Bancorp (HNBC) of Michigan City, Ind., and says it has a strong CEO.

I was really intrigued by the presentation from David Neuhauser of Livermore Partners. The Chicago-based firm specializes in the energy, financial and industrial sectors. The firm seems to have the private-equity mindset and uses its relationships with investors such as Carl Icahn, Riverstone Holdings and WIlbur Ross to generate ideas and engage in activist-like endeavors.

Neuhauser became my very good friend for life when he spoke about Volt Information Sciences (VISI). This is one of my favorite long-term stock picks. The company has gone through a lengthy restatement process that has weighed on the stock. The long-term future of the staffing company is pretty solid, and it should be able to re-list on the NYSE before too much longer. Neuhauser estimated that the company is worth $15 to $20 a share. I like this stock, and if you do not already own it, you should be a buyer ahead of tomorrow's conference call to review corporate strategy. That call will take place at 4 p.m..

He also likes the Canadian oil and gas company Zargon Oil and Gas. The company develops and produces oil and natural gas in Canada and the U.S. Neuhauser points out that this company really isn't in the business of searching for oil but focuses on extracting more oil from developed locations. He estimates the net asset value of company at around $12 a share, well above the current $8 level. He views the company as a "low decline" stable oil company -- a term that refers to an oilfield's rate of depletion -- and notes that the CEO owns 5% of the company. The shares yield 8.5% at the current price.

No matter what is happening on a day-to-day basis, the ongoing job of a value investor is to continually walk around the corners of the market, kicking over rocks in a search for bargains. Staying on top of the various conferences and gatherings can help uncover ideas we may overlook. It would be expensive and time-intensive to attend them all, but in today's high-speed world, the information is available very quickly. These two presentations provide ideas that are worth further investigation.

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