The deadline for 13F filings is now past us, and the media is losing its mind over the filings of Warren Buffett, Carl Icahn and other rock star investors. I will read their filings, but the information is not that useful to me in my search for bargains.
Your chance of finding treasure on a beach is dramatically reduced if there are hundreds of people with metal detectors on the same patch of sand where you are hunting, so you need to find a less-crowded beach. I prefer to track the smaller activist and value investors who are putting up solid numbers but remain out of the media spotlight.
My favorite institutional investors to steal from each quarter are those investors that specialize in community bank stocks. There are a small handful of folks who specialize in these small stocks, and a few of them are more than willing to take an activist approach if they feel it is called for with a particular bank.
FJ Capital is one of my favorite firms from which to steal ideas. The Arlington, Virginia-based firm has put up some excellent numbers since it opened its doors in 2008 and it is enjoying another strong year in 2016. I went through its filings yesterday afternoon and found a few stocks worth buying for a "Trade of the Decade" portfolio.
The fund was a buyer of Bay Bancorp (BYBK) during the third quarter. This bank has been showing up in the portfolios of several bank specialists this year, and for a good reason. The bank has strong management and the shares are still cheap at just under tangible book value. Insiders have been buying shares consistently this year and own about 10% of the bank. H Bank, which is controlled by Bay Bancorp Chairman Eric Hovde, owns an additional 21% of the shares outstanding. Management has plenty of skin in the game, and this is one of my favorite small-bank holdings right now.
FJ Capital was also a buyer of Hampton, Virginia-based Old Point Financial (OPOF) . It has pretty good company as PL Capital, Stieven Capital and Wellington Management also owned shares of Old Pont at the end of the third quarter. The bank is doing a solid job of executing its growth strategy and currently is seeing its strongest organic loan growth since 2008 according to Old Point CEO Rob Shuford. The stock is trading for 1.04x tangible book value.
I am somewhat surprised that we have not seen a sale of Anchor Bancorp (ANCB) yet. Two large shareholders have called for the sale of Anchor in the past year or so, and the bank has hired an investment adviser to explore sale options.
With 19 branches and $436 million in assets, Anchor Bancorp is a long way from the $1-billion asset level that most observers think banks need to achieve to be viable as a stand-alone institution. FJ Capital appears to share my sentiments as it opened a position in the stock over the summer. With the stock trading at 95% of book value, there is decent upside left in the event of a takeover in the next year.
The fund continued to be a buyer of Shore Bancshares (SHBI) , which operates in my old stamping grounds on the Eastern Shore of Maryland. SHBI was one of the first banks I invested in after the credit crisis, and although it has been a wild ride I have just about doubled my money in the stock over the last six years. The stock has surged in the past few weeks in the Trump bank rally, but I would look to be a buyer if it pulls back toward book value as reality reasserts itself in the next few weeks.
FJ Capital was also a buyer of several banks that are too small to mention here on Real Money. It is more than worth your time to go to www.sec.gov and read the filing for yourself to uncover these smaller banks.
When approaching small banks right now, it might make sense to put orders in a little under the market. The Trump trade in bank stocks has been spectacular over the past week, and we may have gotten a little ahead of ourselves here. While I do hope we see a less restrictive regulatory environment, I have my doubts how much get done anytime soon. The legislative process will be a lot messier than most assume and will take longer than the market currently is pricing.