Everyone pays attention to the 13HF filings of the current top performers and media darlings. I do as well, but I pay even closer attention to the buying and selling activities of those who have churned out superior returns for decades. One or two great years could be a lucky coin flip; long-term success indicates the ability to consistently find safe and cheap stocks.
When I first started tracking these filings, only a handful of like-minded souls were doing so. The process was cumbersome: You had to order the reports from the SEC and then painstakingly compare them, line by line, to discern buying and selling activity. Today you can read them in real time, and the activities of money managers and hedgies is available all over the Internet almost instantly.
The filings of such luminaries as David Einhorn, Bill Ackman and of course the Oracle of Omaha garner scads of attention from the media and blogosphere. I track all of those star managers, of course, but I also pay attention to the old-school value guys. These grizzled veterans of the markets have been successfully finding safe and cheap stocks for decades -- and almost no one pays them any mind.
One such investor is Michael Price, who has been a value titan for decades. He was the manager of the noted Mutual Series family of value funds for years before selling them to Franklin Templeton back in 1996, leaving that firm after five years to form MFP Investors. He learned the art and science of value investing from the legendary Max Heine. I have been stealing ideas from price for more than 20 years now with a great deal of success, so I find his quarterly filings very worthwhile reading.
Like many other value and distressed-asset investors, Price's MFP Investors was very active in the third quarter. The steep decline in August and September gave investors a chance to pick up stocks on favorable terms, and MFP was quick to do so. The firm opened a new position in several stocks, including home respiratory care and oxygen services firm Lincare Holdings (LNCR). The company has seen some margin pressure from Medicare reimbursement rates, but this is a great business. Lincare is growing both by acquisition and through the opening of new centers. As the population ages, this company should continue to grow revenues and earnings at double-digit rates for a long time to come and is worth buying on broad market declines.
Price remained active in bank stocks during the quarter. He is apparently a big fan of mutual thrift conversions, as he bought a new position in another deal in Q3. First Connecticut Bank (FBNK) completed a conversion transaction in late June and MFP Investors purchased 200,000 shares. The stock has traded above the IPO price but is still cheap at about 80% of book value. MFP Investors also increased its stake in Franklin Financial (FRNK), a conversion from earlier this year. Other thrift conversions owned by Price's firm include two of my longtime favorites, Capital Federal Financial (CFFN) and Fox Chase Bancorp (FXCB). Both are still cheap enough to buy today. Thrift conversion can be one of the best ways to take advantage of the Trade of The Decade, as they are usually cheap on a price-to-tangible-book basis and have lots of excess capital after the conversion and IPO process are completed.
Price's top holding is JC Penney (JCP), a company that has come under activist pressure in the past year. Much of the rest of his top holdings are concentrated in two sectors with big long-term potential for investors: banks and energy. In addition to his thrift conversion holding his firm, has large stakes in West Coast Bancorp (WCBO), Citigroup (C) and Symetra Financial (SYA). His holdings in the energy sector include Gulfmark Offshore (GLF), ConocoPhillips (COP) and Rowan (RDC).
Stealing ideas from consistently solid investors like Michael Price may help us to achieve similar results over time. So read the reports, do your homework and join the hunt for diamonds in the rough.