It had been a busy weekend around Chez Melvin. I had stacks of SEC Form 13F reports to read, which inspired some interesting stocks ideas for further research. On Sunday, I took some time off to employ the Melvin theory of boating (have friends with boats and be very nice to them) in the Harris chain of lakes, and I finished off with more 13F reading last night.
If you had spent as much of the weekend reading on the Internet as I had, you would have heard about Seth Klarman's acquisition of Ocwen Financial (OCN), the large number of funds that bought the Alibaba (BABA) IPO, and Bruce Berkowitz's new energy positions in Chesapeake Energy (CHK) and British Petroleum (BP). I can't add much to these stories, but I want to discuss two other pieces of news from my 13F reading.
Bill Ackman, David Einhorn and David Tepper are today's superstar money managers. In his days at the helm of Mutual Shares in the 1980s and 1990s, Michael Price was all that, and more. Since he had stepped down after the sale to Franklin Templeton Investments (BEN), Mr. Price has faded from the spotlight. Today, he runs a much smaller fund named MFP Investors. He has continued to be a valuable source of great stock ideas.
Mr. Price is still a fan of the ''trade of the decade'' in community banks. He owns a lot of small banks in his portfolio. During the quarter, he opened new positions in Meridian Bancorp (EBSB) and Investar Holding (ISTR). Both banks had stock offerings in the corner, so I assume he bought on the offering. He also added to his stake in Franklin Financial (FRNK) and The Bancorp (TBBK).
Mr. Price is also continuing to expand his energy holdings. He was a buyer of SandRidge Energy (SD), GulfMark Offshore (GLF) and Apco Oil and gas (APAGF). Oil prices have plummeted since the end of the quarter. I will be less than surprised to see that he ramps up on energy-related holdings in the current quarter, when we see that report early next year. If you are not following Mr. Price's 13F filings, you should be. Reading them is an education in the art of value investing.
There is a saying that the best test of someone's intelligence is how much he agrees with you. By that measure, the folks at Aegis Capital are smart. I discovered this small fund manager because every time I pulled up the institutional holders list of my favorite stocks, I found its name. Aegis describes itself as a contrarian, fundamentals-driven mutual fund focused on deep-value small-cap stocks. Its portfolio reflects this.
Aegis owns some of the deep-value stocks I have talked about in the past year, such as Resolute Forest Products (RFP), Equity Commonwealth (EQC), BRT Realty Trust (BRT), and Coeur Mining (CDE). This quarter, the fund has been active in some of the same ugly pockets as I have been. Aegis purchased shares of Paragon Offshore (PGN), the drilling company spun off earlier this year by Noble (NE). Paragon has a fleet of 34 jackups and 8 floaters operating around the world, and the stock has been in a free fall. The stock has firmed up this morning, after the company announced the acquisition of Prospector Offshore Drilling, and the stock may be bottoming. The stock trades at 35% of book value and yields 10.48% at the current price.
During the quarter, Aegis also bought Seismic data firm Mitcham Industries (MIND) and distressed marine contractor Cal Dive International (CDVI). Aegis has also been buying the battered mining sector. The fund purchased shares of Rio Alto Mining (RIOM), a Canadian company that explores for gold oxide, copper, and silver properties in Latin America.
The fund also purchased a stake in Avino Silver & Gold Mines (ASM), another Canadian Company that is engaged in the production and sale of silver and gold in Canada and Mexico. I don't own either of those, but both have also been pretty active among mining stocks this year. I doubt the managers of Aegis have any more talent at predicting metals price trends than I do, but we can both identify when a sector is cheap relative to the value of the assets involved.
When stealing stock ideas from 13F filings of value and activist investors, do not just chase the same four or five leading superstars. Dig deeper and find those firms that are not in the spotlight, but are also turning in strong results, by purchasing safe and cheap stocks.
