Second Curve’s Tom Brown, CEO of Second Curve Capital and a Bloomberg TV contributing editor, spoke with Betty Liu and Jon Erlichman on the phone. He discussed JP Morgan Chase’s (JPM) fourth quarter results. He said he expects JP Morgan to increase dividend payments during the second quarter. “There will be stock buybacks down the road in addition to a nice dividend increase,” Brown said.
Thomas Brown was clearly bullish on JP Morgan. “They not only report better than expected results but the accounting is very conservative. So they are positioning themselves well for the future,” added Brown.
Tom Brown’s Second Curve invests exclusively in financial companies, mostly in small to midcap names. Here are his top 10 holdings in his latest 13F (in alphabetical order):
1. Altisource Portfolio Solutions (ASPS): Altisource lost nearly 7% since this filing, underperforming the market by a large margin. Altisource insiders were selling as the stock price went from $31 to $27 in November.
2. Banner Corp (BANR): Banner Corp gained 4.7% since the end of September. The stock declined by more than 25% until mid December and took off after that. Steven W. Rust, Executive VP of Banner, made a small but very profitable purchase as the stock hit the bottom on December 16th. The stock returned 39% in less than a month after the transaction.
3. Cobiz Financial (COBZ): Cobiz increased by 11.5% since September 30th. Like other financial stocks, Cobiz declined from $5.55 at the end of September to as low as $4.71 on October 29th. Cobiz’s Chief Credit Officer, Robert Ostertag, stepped in on October 29th as he saw Cobiz’s stock price dipping at $4.71 and purchased 1,500 shares at $4.76. Currently Cobiz trades at $6.19 and Ostertag’s return is almost 30%. Insiders know when it’s a good time to buy.
4. Compucredit Corp (CCRT): Compucredit returned 47% since the end of September. As some insiders were selling Compucredit above $6.50, Tom Brown’s Second Curve was buying it below $7. Brown is also an insider of this company, owning more than 10% of outstanding shares.
5. Ocwen Financial (OCN): Ocwen increased by only 4% since September. William C. Erbey, chairman of Ocwen and also a director at Altisource, was selling both OCN and ASPS stocks when they were down. Ronald M Faris, president and CEO of Ocwen, is a much smarter insider. In May 2009, he sold Ocwen stock at $12.75 per share. In August 2010, he bought back 10,000 shares at $8.78. He knew when to sell and when to buy.
6. Primus Guaranty Ltd (PRS): Primus increased by 12.7% since September. Tom Brown’s Second Curve is also a large shareholder and insider of Primus Guaranty. During the past three months some insiders were selling below $5 per share whereas Tom Brown was adding to his holdings at or below $5.
7. Synovus Financial (SNV): There weren’t any significant insider transactions at Synovus since September 30th. Synovus gained 13% since September but not before dipping below $2 per share at the end of November. Currently the stock trades at $2.77.
8. Taylor Capital Group Inc (TAYC): The stock gained almost 10% since the end of September. Tom Brown is also a 10% large shareholder of Taylor Capital and has to report his transactions. He has been buying Taylor Capital consistently until the end of October. He stopped buying after a more than 20% increase in less than 3 months.
9. Western Alliance Bancorp (WAL): Western Alliance gained nearly 9% since September. Todd Marshall, a director of WAL, bought 134,000 shares between $5.98 and $6.21 per share at the end of November. As you may see, Todd Marshall’s return is twice as much as Thomas Brown’s.
10. Wintrust Financial Corp (WTFC): Wintrust Financial increased by a little more than 1% since September. We don’t have any recent insider transactions at Wintrust.