The 13F parade is slowly gaining momentum as the week progresses. Today should be a busy day, and the floodgates will open Monday as the 5pm deadline approaches. I am keeping my eye on the bank specialists and activists, as their buying and selling activity has been a source of some phenomenal profits over the years.
They are way off the Wall Street radar screen, as the stocks they own are pretty small and most institutions simply cannot operate in the space for size reasons. But I have no such restrictions -- and neither do most individual investors. I spend little to no time worrying about liquidity, as I buy stocks like others might buy a home or a business -- with an eye to long-term ownership. The vast majority of the small banks I have owned over the years have been exited as a result of a takeover.
Lawrence Seidman is one of my favorite bank-stock investors to steal ideas from each quarter. The New Jersey-based activist has a very high rate of success at forcing banks to take steps to increase shareholder value, or sell the bank outright, and I have made a good deal of money pirating his stock selections. He was a little more active this quarter than last, with eight buys and eight sells. Most of his sells were small, and he only sold out of one very small bank stock in which he held a miniscule position.
The largest sells in the quarter included a 16% reduction in his Beneficial Bancorp (BNCL) holdings as well as a 16% sale of his Laporte Bancorp (LPSB) position. He also shrank his Westbury stake by 24%, and Investors Bancorp (ISBC) by 10%. I own all four, and although am not inclined to follow his lead just yet, I will be sure to sit down with the latest filings and reports this weekend to make sure I am not missing anything.
Seidman's biggest buys in the quarter were Malvern Bancorp (MLVF) and Bankwell Financial Group (BWFG). His funds were also buyers of Blue Hills Bancorp (BHBK), Towne Bank (TOWN), Provident Bancorp (PVBC) and Waterstone Financial (WSBF). His other buys are too small to talk about on Real Money, but it is worth your time to go research his filings - as both are well run, cheap little banks.
Dallas based Clover Partners is another activist with a successful track record of bank-stock activism. Fund manager Johnny Guerry remains pretty bullish on the small banks, with 21 buys and just six sells in the quarter. A quick check shows that a good deal of his selling was related to takeover offers for some of the stocks he held, but he did sell his stake in Investors Bancorp and Oritani Financial (ORIT) is the quarter.
The fund's biggest buy was an addition to its holdings in Financial Institutions (FISI). Clover partners is engaging in a proxy fight with the Warsaw New York-based bank and has nominated Guerry and one other representative to the board. Clover has accused management of making acquisitions that destroyed shareholder value, and ignoring shareholder complaints.
I find it very interesting that Guerry is buying southwestern banks in Texas and Oklahoma. He was a buyer of LegacyTexas Financial (LTXB), Southwest Bancorp (OKSB), Independent Bank Group (IBTX) and Comerica (CMA). So far, I have not pulled the trigger on any Texas banks, but if they keep declining during the rest of 2016, I could end up owning several that have manageable energy exposure and look like attractive takeover candidates.
His top purchases also include three banks that are pretty high on my "I am little surprised no one has made an offer for this one" list of banks. Clover Partners was a buyer of Bank Mutual (BKMU), Independent Bank (IBCP) and BankFinancial (BFIN). All three are solid banks in good markets, with shareholder lists full of activists and bank specialists who would be in favor of a sale at a premium valuation.
So far, we have seen a handful of activist and value investors report their first quarter holdings. The rest of the Street will follow the big guns, but I think we can make a lot more money stealing ideas from the smaller funds with strong track records of success.