Look Past the Big Guys on 13F Filings

 | May 15, 2013 | 2:00 PM EDT  | Comments
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cown

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fce.a

It is that time again already. Today is the deadline for 13F filings and we are starting to see reports from the best hedge fund and money managers flow into the Securities and Exchange Commission.

The reports from the big guys like Einhorn, Paulson and Ackman will be examined, reexamined, and talked to death in the media over the next few days. I will read them and might comment if there is something extraordinary. But for the most part I leave the big guys to everyone else. As a deep-value guy I have a few favorites who have successful track records and have provided some exceptional ideas over the years.

The newest addition to my must-read list is Paul Isaac of Arbiter Partners. He not only has a solid track record but deep ties to the original value greats such as Walter Schloss and Max Heine. With such a pedigree and track record he is a must follow. He actually filed his report last Friday ahead of the rush, but I just sat down with it last night

I am always happy to see a great investor reach some of the same conclusions that I have. In a recent interview with a Columbia University publication in which   Isaac commented on community bank stocks.

Issac told Graham and Doddsville Magazine:  "For we've decided that the increase of compliance and regulatory burdens on community banks is going to make community banking relatively difficult to conduct profitably, particularly in a low-interest-rate environment. So, we're interested in acquiring shares in banks with reasonable footprints that are relatively clean trading at significant discounts to their tangible book value. If the discount is great enough, the lack of profitability is not a deterrent -- it's actually an incentive because chances are they're more likely to give up the ghost."

His fund has backed up ghost-shared enthusiasm for the Trade of the Decade with positions in 12 community bank, four of which were new positions in the first quarter. Most are too small to mention here but it's worth your time to read his filings.

He also opened a new position in The Phoenix Companies (PNX), the life insurance and Annuity Company. This company is, as my kids would say, a hot mess. The company executed a 1-for-20 reverse stock split last year, is restating financials and is the subject of a flurry a class action shareholder suits. The stock trades at just 22% of book value and is worth more investigation. I have not looked at the company in depth yet but I have done well with messed up insurance companies at steep discounts to book over the years.

 Isaac also increased his stake in one my favorite long shot broker dealers by buying more shares of Cowen Group (COWN) in the quarter. I like everything I see with this company. Broker dealer revenue is finally back at 2009 levels and the Ramius alternative asset management division took in $850 million of new money in the first quarter.

Cowen recently completed an acquisition that gives them a strong presence in metals, mining, energy and agriculture segments, all of which see substantial M&A and recapitalization activity over the next few years. The stock trades at just 63% of tangible book and is a solid buy at these prices.

I am intrigued by the new position the fund opened in Forest City Enterprises (FCE.A) in the quarter. I own the stock, having purchased some when it was below book and the future of real estate was bleak according to the experts. The stock has moved up since then but they do own some premier real estate, including the Barclays Center in Brooklyn.

Forest City owns more than 32,000 apartments, 14,000 military housing units, 47 office properties, 17 malls, 28 shopping centers and 2 hotels so the stock is a broad based bet on a continued economic and real estate recovery. They have been selling some non-core assets to pay down debt and reinforce the balance sheet. The stock is up strong this year so I am not sure I would chase the shares but buying n a pullback could make sense for long term investors.

Paul Isaac has deep roots in the value community and a strong track record over the last decade. He has quickly become a must follow in the crowded 13F filing season.

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