Earnings season is winding down, but 13F season is just cranking up ahead of Monday's deadline for institutional investors to file these reports with the U.S. Securities and Exchange Commission. As always, I like to focus on the 13Fs from the handful of institutional players who specialize in community-bank investing and small-bank activism.
For those of you unfamiliar with 13Fs, these filings require institutions with at least $100 million in assets to spell out what they owned during the latest quarter. This lets you figure out what the firms -- including some of the best value and activist investors -- bought and sold during the period. So, I view 13Fs as the world's best free research service.
Let's check some of the latest 13Fs out:
PL Capital Advisors
This is one of my favorite filings to look at for ideas in the small-bank space. After all, PL Capital co-founders Rich Lashley and John Palmer each have more than three decades of experience in the banking industry, including the past 20 years as hedge-fund managers.
They're not afraid to go activist, as their industry experience and knowledge lets them know what it is that banks must do to boost shareholder returns. Lashley and Palmer have crushed the S&P 500 and the relevant bank indices over the past 20 years, and I've made a bunch of money using their ideas.
PL Capital's latest 13F shows that the firm wasn't very active in the second quarter, but did buy into a few banks. I'm especially interested in the large-cap firms that Lashley and Palmer invested in, as they started a new fund this year to take advantage of the M&A activity that's beginning to spread to larger community and regional firms. This fund aims to target a handful of larger banks that PL Capital sees as susceptible to activist pressure.
Lashley and Palmer appear to have found some of their first such firms during the second quarter, as they bought Capital One (COF) and both shares and warrants for PNC Financial Services (PNC) . Capital One currently trades at book value and has just a 9.0 price-to-earnings ratio, while PNC fetches a small premium to book value and has a modest 11.6 P/E. Both stocks also yield more than 2%.
If Lashley and Palmer seem likely to have anywhere near the success with larger banks that they've enjoyed with smaller ones, then smart investors should take note of these purchases and consider "piggy-backing."
Among smaller banks, PL Capital recently added to positions in United Financial Bancorp (UBNK) and Peoples Bancorp (PEBO) , and also opened up a new stake in Riverview Bancorp (RVSB) . Given the firm's success in community banks, it might be worth buying some of these names as well on any market pullback.
Activist Lawrence Seidman has been investing in community banks for more than 25 years and has been involved in some epic proxy fights and boardroom battles in that time.
A former SEC attorney, Seidman has said that he doesn't go looking for a fight and would prefer to work with management to improve a bank and increase its share price. But his history shows that if it comes to a fight, he won't back down. So, his 13Fs are always must-reads.
Seidman's latest filing shows that he bought shares of eight banks during the latest quarter. He made very small additions to his holdings in Stonegate Bank (SGBK) , Prudential Bancorp (PBIP) , ASB Bancorp (ASBB) and Waterstone Financial (WSBF) . Seidman was also a larger buyer of Equitable Financial (EQFN) , increasing his stake by 35%. Similarly, he boosted his holdings in PB Bancorp (PBBI) by 25%.
The activist also opened two new positions during the second quarter. First, he bought into Coastway Financial (CWAY) . This Rhode Island-based bank is trading at just 83% of book value and Pl Capital and other activists also hold its shares.
Seidman also launched a stake in Peapack-Gladstone (PGC) . I strongly suspect he did so during an April sell-off that saw this stock trade below book value for a few weeks. PGC has since recovered nicely, so I'm not sure that I'd chase this name at current levels.
The Bottom Line
The floodgates of 13F filings will really open up today, and then we should get a veritable flood of last-minute filers on Monday.
I'll be tracking all of the buying and selling that the best community-bank investors made during the second quarter in search of new ideas for my "Trade of the Decade" portfolio.