The phrase the Big Three is widely used in various ways. It can mean the top three car companies like Ford (F), GM (GM) and Chrysler. The big three universities can be Harvard, Yale and Princeton if you are on the East Coast, or UCLA, USC and Cal Tech if you are a Los Angeles resident.
Back in the days before cable we had the big three networks ABC (DIS), NBC (CNCSA) and CBS (CBS). My millennial-age son will tell you that the big three is PlayStation 4(SNE), Xbox One (MSFT, and Nintendo Wii U (NTDOY) while my San Antonio-born wife will quickly correct you if you use the phrase to refer to anything or anyone but Tim Duncan, Manu Ginóbili and Tony Parker. During baseball season the big three this year will Manny, Matt and Adam, the combination that is certain to lead the Orioles to a World Series title.
During 13f season there is only one big three for bank stock investors. None of the firms is well known and they try real hard to stay out of the spotlight. The big three for community bank stock investors are PL Capital, Joseph Stilwell and Lawrence Seidman. These three investors have long, successful track records as activist investors in the sector. I pay attention when I see them buying shares of some small, unknown community bank.
These investors know more about banking and bank stocks that I ever will and they have made a lot of money for themselves and their investors by taking activist positions in little banks.
PL Capital was founded by two CPAs, Richard Lashley and John Palmer, who worked as advisors and consultants to the banking industry. They know banking inside and out. When they examine a bank and suggest that changes need to be made, they know what they are talking about.
I track their 13d and 13f filings closely and have stolen some great ideas from them, including a couple of banks that were eventually taken over at a large premium to my purchase price.
PL Capital was not real active in the final quarter of the year, but they did add to their stakes in Metro Bancorp (METR), Independent Bank Corporation (IBCP), HF Financial Corp. (HFFC) and MSB Financial Corp. (MSBF). The firm also opened a small new position in shares of Laporte Bancorp, Inc. (LPSB).
Joseph Stilwell was much more active in the last three months of the year. Stilwell is a very low profile and rarely gives interviews or talks to the press. But those of us who invest in the sector are well aware of his success in pushing for changes that unlock value or forcing the outright sale of a bank at a premium.
When he files a 13d he makes a point of letting the bankers know what they are in for as a result of his ownership. Stilwell points out in each 13d filing that since 2000, he has filed Schedule 13ds to report greater than 5% positions in 55 other publicly-traded companies. He adds, "In each situation, we believed that the values of the companies' assets were not adequately reflected in the market prices of their shares."
Thirteen of the banks were sold at a premium, 11 made some of the sought after changes such as dividend increases and buybacks that allowed Stilwell to exit at a profit. He also gained board seats at seven of the banks.
Stilwell was pretty active in the quarter so we do not have room here to list all of the stocks he bought. His five largest new positions in the quarter were Anchor BanCorp Wisconsin (ABCW), Entegra Financial Corp. (ENFC), Simplicity Bancorp (SMPL), Blue Hills Bancorp (BHBK) and Sunshine Bancorp (SBCP). It is worth your time and energy to go to WWW.SEC.GOV and read the rest of his filings as well as his recent 13d filings on micro cap banks.
If Stilwell is low profile, Lawrence Seidman strives for being indivisible He has been buying community banks with a great deal of success since 1983, and has been involved in many activist situation and proxy fights over the years. His letters to bank boards are classics and his 13d filings can be entertaining when he attaches correspondence with bank executives.
He was also too active to list all of his activity in the final three months of the year but his five largest purchases were Waterstone Financial (WSBF), Clifton Bancorp (CSBK), Prudential Bancorp (PBIP), Malvern Bancorp (MLVF) and Georgetown Bancorp (GTWN). Again, it is worth the time to go read the rest of the filing. You are probably costing yourself money if you don't.
We all know that the "real" big three of all time are Brooks, Frank and Boog but when it comes to making money in the small bank stocks, it is PL Capital, Joseph Stilwell and Lawrence Seidman.