Before we move on from 13f filings, there are a couple of other investors whose filings we should review. Arbiter Partners has been one of the most productive sources of ideas for several years now. Paul Isaac and his team have racked up strong returns since they opened the fund back in 2001. Unlike most value investors, he does not hesitate to short high fliers and mo-mo stocks -- and that has added to the gains the fund earns on his undervalued long selections. I have gained some wonderful ideas from its filings and learned much from my few brief conversations with Isaac.
The fund continues to be a player in the trade-of-the-decade in community banks. It has been a buyer of small banks for several years now. In all, I count 21 banks that fit into the trade-of-the-decade definition in its portfolio, and in the second quarter it added to United Bancshares (UBOH), Bay Bancorp (BYBK), Community Bankers Trust (ESXB), PSB Holdings (PSBH), Kentucky First Federal (KFFB), and First Northwest Bancorp (FNWB). Arbiter also bought share of Kearny Financial (KRNY), a New Jersey bank that just completed its second-step conversion offering.
Arbiter was a big buyer of Amkor Technology (AMKR) in the quarter. The stock sold off after the semiconductor packaging and test services company missed earnings estimates earlier this year, and Arbiter made a large addition to its existing position in the stock. Amkor is seeing weakness in the mobile-device space, most of which appears to be from one large customer, but is cautiously optimistic about the fourth quarter seeing the start of a turnaround in that segment, as several new devices using Amkor products will be released. The company has a lot of things going right: Sales in key Asian markets are improving and they should benefit from the ongoing switch from gold to flip-chip and copper-wire packaging in the industry. I can see why Arbiter was loading up on the stock, as it does not take a great deal of imagination to see this stock trading at 2x or 3x the current quote in a few years.
The fund appears to be positioning to benefit from the growth of much-needed infrastructure spending going forward. It was a buyer of general contractor and construction management company Tutor Perini (TPC) in the second quarter. The company works on big public-works infrastructure projects -- including highways, bridges, mass transit systems, and water and wastewater treatment facilities. Tutor Perini does drilling, foundation, and excavation support for shoring, bridges, piers, roads and highway projects, and it is a builder in specialty markets -- like casinos, hospitals, municipal building, schools jails and facilities for pharmaceutical and biotech companies. The construction business is doing ok, but the company will really shine when we see infrastructure and municipal spending pick up again in the future.
Arbiter was also a buyer of Pentair (PNR) and Koppers Holdings (KOP), two companies that would also see an earnings boost from infrastructure and construction spending growth. Pentair's Water Quality Systems division will see growth from increased spending on water and waste water systems. It also makes products that are used in industrial desalination applications, which could see enormous growth as a result of continued droughts in some parts of the world. Koppers offers carbon compounds, and chemicals and treated wood products and services around the world. It provides raw materials used in the production of steel, aluminum, creosote and concrete that will see strong demand from increases in construction and infrastructure spending.
Isaac apparently likes reinsurance companies where well-known hedge-fund managers run the investment portfolios. He was a buyer of both Greenlight Capital RE (GLRE) whose portfolio is managed by David Einhorn, and Third Point Reinsurance (TPRE) where Daniel Loeb is running the investment side of things. As long as the company is solid on the underwriting side, you end up owning portfolios managed by the best hedge fund managers of the past decade. I like both of these, but would prefer to buy after they have a bad underwriting quarter or the market declines, and I can buy them at a steeper discount.
At the end of the quarter, Isaac had some pretty good short bets on. He owned put options that allow him to bet against Amazon (AMZN), Rackspace (RAX), Tesla (TSLA), Whole Foods Markets (WFM) and Salesforce.com (CRM). This fund also owned puts of large-cap Chinese stocks -- using the iShares China Large-Cap ETF (FXI) -- that have paid off pretty well since the quarter ended.
Arbiter Partners is one of the best firms no one has heard of, and their quarterly filings are a treasure trove of actionable stock ideas for patient, aggressive investors.