by Tim Melvin | November 7, 2013 10:21 am
Some big-name investors are getting their 13F filings into the SEC ahead of the mid-month deadline, but they’re not worth your attention.
The filings of the stock market super stars like Warren Buffett and David Einhorn will be ruthlessly analyzed, and every little buy and sell discussed to the point of weariness. I have no real need to know who bought and sold Apple (AAPL[1]), IBM (IBM[2]) and Ford (F[3]) during the quarter. I am more interested in finding smaller, off-the-radar managers that are successful and stealing their ideas in a competition-free zone.
The first couple of weeks of each quarter I like to spend some time every day skimming over the 13F filings[4] as they come in to see if any mangers catch my interest. It only takes me a glance at a portfolio to see if I have any interest. The vast majority of professional money managers are little more than index tweakers, and there is no real value in examining their buying and selling activity. But once in a while I run across one that is worth adding to my list, like I did today.
I noticed that Castle Creek Capital Partners owned some of the same little bank stocks I do. They have concentrated portfolio that holds just 8 banks, and have not bought or sold a single share of stock in the last quarter. So far this year, they have purchased three stocks and had two removed from the portfolio by takeover. These are my kind of patient bank investors. There web site describes them as merchant banker specializing in community banks.
One of their biggest positions is First NBC Bancorp (NBCB[5]), a 31-branch bank operating in New Orleans and the Mississippi Gulf Coast. This is a solid little bank with about $3 billion in total assets. They have an equity-to-asset ratio of 10.8 and a solid loan portfolio. Nonperforming assets are just 0.77% of total assets, well below the industry average. The stock appears a little rich to me at 1.5 times book value, but one has to imagine that Castle Creek has hopes of selling their 7% stake at much higher prices in the future.
One of their more recent purchases is Eastern Virginia Bancshares (EVBS[6]). Castle Creek took part in a rights offering designed to recapitalize the bank, and it currently owns 8.7% of the bank. The 22-branch bank has about $1 billion in assets and has made great strides in reducing problem assets. It paid back its TARP loans this year and is well positioned to grow in the Tidewater and Richmond markets of Virginia. The stock is very cheap, at just about 50% of book value. I also own this stock, and I think the shares offer enormous potential returns.
Several of their banks have limited liquidity or are just too small to discuss here. I can promise you that it is probably worth your time to look at the filing yourself and steal some ideas for the trade of the decade in small bank stocks.
As of this writing, Tim Melvin was long EVBS.
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