As tomorrow's 13F deadline looms, the filings are starting to come in fast and furious. My printer is running pretty much full time and my wife just avoids the second floor so as not to see the mess I have developed up there.
I will be spending a significant part of the weekend reviewing these filings to find investable ideas that can help us get some cash to work in what is clearly a fully to overvalued market. That is a tall order, but at a minimum we can add names to our "buy in a pullback" list that have been researched and vetted by some of the best minds on Wall Street.
One of my favorite bank stock activists filed early and it's remarkable how inactive Joseph Stilwell was in the second quarter this year. He took his profits in Naugatuck Valley Financial (NVSL) when the bank announced it was being taken over. Stilwell also unloaded most of the stock of Cape Bancorp (CBNJ) he received in the takeover of Colonial Financial but did retain 127,000 shares of the South Jersey/Philadelphia area bank. He also sold a very small bit of First Financial Northwest (FFNW) and Jacksonville Bancorp (JXSB).
As for the buyside, Stilwell was not very active at all. He bought a little more Lake Shore Bancorp (LSBK) in the quarter, bringing his stake in the Dunkirk, N.Y.-based mutual holding company to 264,150 shares. The bank appears to be trading a little over book value, but the holding company still owns more than 60% of the bank so the actual equity value is understated. The shares owned by LSBK would be sold to the public if and when it does a second step offering so the proceeds would increase equity value substantially. Depending on what price the bank sells the shares at in an offering I think the stock is worth much more than the current stated book value.
The activist investor also added about 2% in Wayne Savings Bancshares (WAYN), which brings his total stake in the Wooster, Ohio thrift to a total of 251,220 shares. The stock is trading at 85% of book value and is a solid candidate for a "trade of the decade" portfolio.
Stilwell is one of the more successful community bank stock activist investors and it's worth your time to look at his complete 13F filing to see which stocks still trade below book value.
Donald Smith & Co. also filed early and you have to admire the courage of its convictions. The firm has been buying gold and silver mining stocks for a couple of years now and, as we know, that has been something of a painful exercise. But the firm just keeps buying and added to its stakes in Kinross Gold (KGC), Yamana Gold (AUY) -- a holding in TheStreet's Stocks Under $10 portfolio --, AuRico Gold (AUQ), New Gold (NGD) and Couer Mining (CDE).
The firm also opened new positions in Alamos Gold (AGI) and Asanko Gold (AKG). It is worth noting that Smith opened his firm in 1983 and has compounded at about 15% a year since then buying the very cheapest stocks and holding them through periods of pain before profiting greatly when they recovered.
Smith was also a buyer of insurance companies in the recent quarter as many of them still trade at significant discounts to book value. Purchases included American National Insurance (ANAT), CNA Financial (CNA), Aspen Insurance Holdings (AHL) and Loews (L). Insurance stocks purchased below book value have been very rewarding to me over the years and I expect that that these names will be very rewarding for long-term holders.
The firm also accumulated additional shares of Resolute Forest Products (RFP), one of my favorite long-term holdings. If the world doesn't end and the housing markets continue to slowly improve, this stock is worth a lot more than the current quote. The stock was recently trading at just 50% of book value. Over the next five years or so, I believe RFP will produce returns measured in multiples, not percentages.
It will be busy around Chez Melvin this week and there will be a mountain of 13F filings to dig through. Hopefully, we can pull out a few gems that have the potential to be significant long-term winning stock selections.
