oddballstocks

I like the idea of a manager who is already financially independent. Because if he has a track record that is worthwile, he'll be already a long way towards financial independance. Secondly, as a partner, you don't want your manager to be pressured to take unnecessary risks because he needs the fee money to survive. For an investor, patience is no luxury, it is a neccessity, and if your manager is being pressured by debt or by income problems, the first thing to go is the patience, and with it the rationality and prudence. This is the current reality, the only people who can get into investment management either are young and have no expenses, or those who are older and already made enough money that day to day expenses aren't an issue. This eliminates anyone who decides they'd like to have a family, which is probably why working all of the time is lauded for investment managers, they're either young or beyond kids. Why would someone who's financially independent take on someone else's money to manage? Managing money for someone else is not the same as managing your own money, it's much more stressful, with more responsibility. If you are well off why add that to your life. If I were financially independent I would not be managing outside money as something fun, I would probably manage my own money and spend time on things I wanted to do like skiing, biking etc. The way for someone to manage money who has a family on their own appears to be as a RIA who builds a considerable book of business and earnings a straight fee, or for someone who's wealthy parents/relatives bankroll their living expenses while they build up AUM. The second route is all about connections, if you come from a wealthy family I'd imagine it would be easy to collect assets which means you wouldn't need to live on your parents money for long.

Quite a set of accomplishments to be "nothing to write home about." I would say that he has something going on if he can attract $600MM in assets, attracting significant amounts of capital isn't easy. If he's kept it then I'd presume his clients are satisfied with his performance as well which is something to speak of as well.

The structure is fair, but has a hole in my view. If you can't earn an incentive fee in the first year or two, or you start in a bad market there is no reason to stick around and try to earn out of that hole. Maybe this works if you're independently wealthy, but if I'm running a fund, and I need a fee to pay for food/mortgage/kids I can't be waiting around forever hoping to eventually earn a fee. I guess maybe this could become an advantage, if I do end up waiting for years I might not have to pay child support or alimony after my wife divorces me because I"ll have no income. A sizable drop and a quick rebound, like what we just experienced isn't much of a problem, the fee might be lost for a year. What kills this structure is multiple years of declines, or a flat market. Not everyone can be Buffett, I applaud anyone who's done well with this structure, although there's an element of survivorship bias in it. Where are the stories of managers who tried it, didn't make any money and shutdown their fund and started a new one? I like a structure where the manager is paid something, enough that they're not worried about getting another job or taking crazy risks, yet they are incentivized if they do well.

Right now we're using the data that comes out 57 days after the quarter ends, so in the next week and a half or so we'll be updated. Our goal is to move to the real time reporting which will give access to some banks before the 57 day deadline, although at 57 days past quarter end is the date that all banks are guaranteed to be updated. Right now we update both banks and holding companies at the same time. As I'm sure you know the only holding companies that will be updated in Q3 are those with over $500m in assets, which is about ~970, there are ~3700 holding companies with assets below $500m. As I'm sure you saw, the site has a comparison feature as well. You can save off the banks you're interested in comparing, log in once a quarter, send those banks to the compare page and download to Excel, all those hours of work compressed to 10m or less. We're working to make the entire site Excel downloadable, it's on our test site now, hopefully it'll be live for all users in a week or so. Users will be able to download a single data table (Loan & Lease Summary) or an entire page (Bank Summary, Asset Quality etc), or search/compare results.

Nice work, signed up for a trial run. I did notice a potential bug on tier one capital calculation (it looks like you are using capital figures versus reported tier one figures in at least one bank). This particular bank has a large deferred tax component that is included in capital but included in tier one calculations per Call report guidelines. http://Bankregdata.com probably a better provider at current time vs fdic.gov website. I like that there is something else to look at though. Thanks for sharing! Can you send me the bank rssd, or name? I use the same data as Bankregdata, Thompson Reuters, and SNL, so I'd be curious to see why we have a difference and will work to correct it. We pull from the FDIC, Federal Reserve (FFEIC) and SEC. Except in a few cases we don't touch the data, so whatever a bank reports to the FDIC/Fed/Sec is what we show untouched. I know of at least one case where a bank didn't report the same numbers to any of the agencies for the same time period, but that's an anomaly, in every other case I looked at everything lined up. Clearly I didn't go through and verify the numbers for all 6900 banks, that's the FDIC's job! You can get our data for free from the call reports, and holdco filings, what you can't do with those reports is screen them or quickly look at 9 quarters/years of information without downloading all the PDF's and building some giant albatross in Excel. The data is the same between all the sites that provide this, where we are trying to stand out is by providing better tools. Another item to consider is the call reports are built for regulators not investors. Thanks for giving the site a try! Sanjeev, Ajc - Thanks!

This is what I see, fewer and fewer companies that he can put any amount of cash into. I'm not sure if there's even that much for us mere mortals who don't have billions to invest. Of the nine thing he can invest in anymore I guess Exxon was the best right now, I don't know if there's anything we can read into or get out of the deal for ourselves.

Thanks for posting this, always appreciate the publicity. As for cost I'll say it's extremely competitive compared to the current offerings, we're bringing better tools to the market place at a fraction of the cost. If you're being gouged by the by heavy weight in the market (their prices make a Bloomberg terminal subscription seem like a pack of gum..) it's worth testing what we offer and seeing if it's a fit. In terms of specific pricing I'd say shoot me an email at ntobik [at] completebankdata.com and we can talk specifics, I don't want to break any board policies, and I'd rather talk specifics in private rather than in public. Thanks! Nate

Funny, came here right after reading that as well, fascinating blog post for sure. He's selling that business but keeping the CB Radio business that was doing $1m+ a year after its second year. There was a post on here a while ago about someone looking for a way to invest $100k unconventionally, this sort of thing fits the bill!

James, I know amongst my circle of friends who are all early 30s professionals we're all experiencing inflation and wage stagnation. I've had countless conversations with friends, who are all conservative pay cash don't have debt types who have said they are shocked at how living costs have shot up on them. Groceries, insurance, everything has gone up, and raises have been in the 1% range. A big cost increase has been healthcare. My company is very generous, well, at least they were in the past with healthcare. Four or five years ago we had an all expenses paid PPO for about $250/mo, that plan now costs $700+ a month, or they offer a plan for $275/mo that requires employees to foot the bill on the first $3500 out of pocket. I agree that some things have stayed flat. I recently purchased a Macbook Air, the price was slightly less than what I paid five years ago for a Macbook. The new computer is much more powerful and better all around, and in real terms much cheaper. Airfare is highly city depenant. Back in 2006/2007 we used to fly from Pittsburgh to Florida for $150 round trip, we'd go often because it was cheap. Now a flight is in the $400 range. It's almost impossible to find a flight out of Pittsburgh for less than $200 round trip unless you're flying to a city within a 2-3 hour drive. Sure I can fly to Baltimore for $67, but by the time I drive to the airport and get there an hour before my flight I'd be 2/3 of the way to Baltimore by car, a deal if time is free. I know I've been told there is no inflation, or it's really low, yet somehow for us and our friends our money stretches less and less. And we make a sizable living. My brother has chosen to live a more modest life, for them and their friends the economic situation is dire. It's very hard to find a job, and expenses have risen considerably, they felt the pinch so much they decided to move to a city in the south with a lower cost of living. I can point to two items that I know have gone up for us, health care, and local taxes to make up for a shortfall in city revenue. Outside of that it's a number of small things that have all increased much faster than my wages have increased. Clearly this post is completely anecdotal, and it doesn't show up in any economic stats, but if I asked everyone I knew they would all emphatically say that wages haven't kept up with inflation.

Between this comment and the go-live of CompleteBankData.com, OddballStocks is really hitting it out of the park today... :) Thanks!

Maybe they're better investors because they aren't hanging out in the digital equivalent of the gym locker room..

You should really go away from these kind of banks. Be aware of regulatory risks! I think it's very situation dependent, there are MANY great banks that are cheap, so if you're into shooting fish in a barrel those are the ones to buy. But there are certain industry dynamics that can make a trade like FMAR attractive. I have heard of one fund manager who looks for average bank subsidiaries and terrible holding companies. That dynamic alone is a catalyst because the FDIC will prevent upstreaming dividends, which can mean a potential bankruptcy scenario for the holdco, and that means motivated managers. A sale usually follows. I agree though, don't invest in banks (read the actual bank, not the holdco) that are losing a lot of money and have negative equity, their days are numbered. The situation is different when the bank is in moderate or healthy shape, but the holdco is not. It's VERY important to distinguish between the bank and the bank holding company.

ok. So you have to do a forex transaction first, right? I did that when I had my individual account there, and just the forex cost me 1% per side. Not necessarily. Often US market makers will hold foreign shares, I hold my Swiss stock in dollars. Fidelity called market makers, found one who had some shares and I purchased them, no forex. I'm sure there was some forex built into the market makers trade, but it was probably much lower. The price I purchased at was almost exactly the quote from CHF-USD at the current mark. I investigated this for a Danish stock as well, they found someone with inventory in the US. These are tiny stocks, I'm talking less than €100m market caps and US market makers held them in inventory. Here's the rub, you pay a $50 fee because the trade isn't DTC cleared, and then the actual commission to Fidelity is $50, so it's $80 to make the trade each way. You asked in an earlier post about cash with Fidelity, I've never deposited cash, but you can do it at one of their local branches. They will accept foreign currency as well, but they only allow withdrawal in dollars.

Fidelity lets you trade anything in any account. I own a Swiss stock in my IRA, yes it cost more to trade, and I had to call in to do it, but I was told if it trades anywhere but Africa they can get shares.

I agree, but there's a VERY important distinction, the actual bank (the regulated piece the FDIC cares about) is alright, they're on thin ice, but I don't see eminent failure in their future, although if they don't turn around they'll be forced into a sale.

First off, awesome question! Here are my thoughts: Banks are regulated, as such a bank (not a holding company) with negative equity is going to end up being liquidated very quickly by the FDIC. What's important in this investment is to break out the subsidiary bank and the holding company that owns the bank. The bank itself has $45m in equity and lost $387k in the last quarter. They charged off $1.5m in loans, which if that comes down the subsidiary will be break-even or profitable. I do have some concern for the bank itself, their net interest income isn't all that high and it isn't covering expenses. They have a lot of non-interest income that is related to mortgage origination, not that this is bad, just something to keep in mind. The bank doesn't have that much of an equity cushion, if they do continue to generate losses it's possible the regulator could force a sale. What's interesting is this is a case where the subsidiary bank has value, they could be acquired easily, but the holding company doesn't have much at all. You asked how to figure out value, I'd start at the sub and build up. Look at the take out value. The first thing I spotted on the subsidiary is they have two branches that are probably losing money. An acquirer would either boost deposits and turn the branches around or close them and cut those expenses. I see two other levers of value, the first is their funding cost is high. Their yield on earning assets is average, but they're on the high side of funding. The second is their expenses in general, there is probably some fat that needs to be cut. An acquirer would look at this bank and cut executives (automatic earnings increase) then they'd look at their deposit base. Almost all of their deposits are interest bearing, and they're in small accounts. You have 395 accounts with more than $250k in them, and 54,529 accounts with less than $250k, and if you look through that 53k of those accounts have less than $100k. Their high rates are attracting savers in expensive products. They could probably drop their rates slightly and not lose that many customers. Take all those pieces together and you can estimate what an acquirer might pay. The number I've always heard is 11x cost adjusted earnings, or book value. I would say in FMAR's case if they cut their deposit rate, cut executives and cut their unprofitable branches it's not crazy to think they could swing from a -$387k loss to a million a quarter in profit, couple that with reduced charge offs at 11x and maybe it's somewhere close to book value. So in general let's assume this bank is worth book value. But the investor isn't investing in the bank, they're investing in the holding company with its own set of liabilities and capital structure. I didn't see any preferred securities in the company's capital structure, just the common equity. The holdco has negative equity because the holdco has expenses at the holdco level compounding losses from the bank. The holdco's actual liability structure is fairly clean. Put these two things together and I can see this thing going for maybe 80% of TBV, so maybe $35-38m, or double the current price. Does this make sense? Thoughts?

I have accounts at Fidelity, Vanguard, Sharebuilder, and Schwab. Sharebuilder and Schwab suck, I opened both to take advantage of promotions and to get a feel for the platform, I dislike both. I forgot I even had money at Schwab until this post, I need to go rescue it, I'm expecting a nasty transfer fee.. Vanguard is fine if you trade infrequently and watch their index funds. My wife's IRA is there, I have some trouble purchasing smaller OTC stocks though. I like Fidelity, I use them for all our banking as well. They have a no-fee cash management account, a debit card, unlimited free checks etc. You can withdrawal cash from any ATM in the world with it without a fee. I was pleasantly surprised when in Spain I used it to withdrawal Euros and wasn't docked any fees, the exchange rate was attractive as well. You mention wanting a brick and mortar bank, but need free checking. Why are you limiting yourself to just credit unions? There are thousands of small community banks that offer free products. I would suggest opening a brick and mortar account for any transactions that need to happen in person, then pairing it with something like Fidelity, that's what we do. Eric pointed out something very attractive about Fidelity. In all accounts they will extend a temporary margin allowing you to trade unsettled funds. Most brokers force you to wait three days for the trade to settle. This is a pain if you want to sell something to immediately purchase something else, a limited opportunity. I've had it happen a few times where if I had to wait three days after selling to free up cash I would have missed out on a few great purchases.

Hear, hear. This is key, just showing up is 90% of investing in micro caps. There are a LOT of tiny companies, it's a matter of numbers. Go through enough of them and eventually you'll turn up the gems. Knowing how exactly to look is difficult. I have adopted a new routine in the last month or so, each Monday I look at ALL the financials for companies that have reported to OTCMarkets in the last week. Most of them I open, and after 2 seconds of scrolling and skimming close and move on. A few I linger on, and a few more go into the research pile. It's all a numbers game, I have seen enough money losing resource companies with crazy capital structures to last a life time, but the prize for sifting through those is finding a little company selling at 75% of BV and 5x earnings. I think I went through 90 companies or so today, it took maybe 35-45m at the most, I found one company that was moderately interesting, nothing to look at further...until next week... Get a list of some market, or some stocks that qualify for something and just start charging through. A last thought, for anyone wanting to put numbers to this, after going through a few thousand stocks I would say that about 5% of any list is actually worth researching, and maybe 1-3% is worth investing in. When you start you'll spend a lot of time on companies that seem good, that is until you've looked through a few dozen and get the rhythm down, then you can move quick.

I have a restriction from my employer that prohibits me from managing money on the side, so starting a fund with a small capital base and growing is unfortunately out of the question right now. This means if I were to manage money from day one I'd need enough of a capital base to replace my salary and pay benefits plus fund expenses from the management fee. I'm married and have two kids so living in an apartment and eating ramen while growing a capital base is out. Instead I've been working on starting a business that I'm hoping will free me from my employer and provide a stable income. With that I can then open a small fund, and since my salary isn't coming directly from the fund I can run a smaller base of capital (less than $10m) without worrying how I'm going to make the mortgage payment, or pay for preschool.

I'd second Adam's reflections, get out there and start writing. I write a blog myself and have received numerous job offers and opportunities to manage capital through contacts I've made while writing. It's a chance to differentiate your self and profile your thinking.

I believe there are exemptions, so if he holds foreign securities or derivatives they don't count towards the $100m threshold. There is also a time period related to reporting, so if a fund goes exempt for a year and pass the threshold the next year they might not need to report. With all that said I'd be surprised if he doesn't raise more than $100m which is then placed in US common stocks.

I know we are trying to be stock pickers here but why not choose the best fund available? For my 401k, I avoid the S&P500 index fund and get the MSCI EAFE/MSCI World funds for more exposure to international markets. My holdings in my IRA/regular are primarily U.S. companies. I also get my fixed income allocation from an actively managed mutual fundd. I have access to some great low cost Vanguard index funds and some good value managers with low expense ratio funds. I know "market return" is not as sexy as what we aim for here but I think having funds in my 401k makes sense for my asset allocation. What is the chance of lobbying the 401k admin to add the brokerage link option? In Vanguard, over 29% of the 401k participants added this option already. I definitely see a trend here. After all, this is America, and I should have the freedom to invest my own money! >:( I've been down the lobbying road myself. You need a certain amount of assets for the brokerage window. I had numerous conversations with the CEO/COO/Head of HR before they finally decided to do anything. What ended up happening was they let me participate in their yearly reorganization meeting to select funds. Company executives are held to a fiduciary standard for the fund, I was not. They would say a fund name and I could offer my input on them, they discussed the options then decided. Technically I wasn't involved in the process, yet all of my recommendations were taken. I took the CEO to lunch and gave a presentation as to why we needed more options and needed to change the 401k. I was able to add a number of index funds and 'cheap' investment options in addition to a number of foreign funds. I would have loved the brokerage window, but it's just not feasible for companies without a critical mass of assets. It's possible your company might be able to upgrade to a brokerage window if they're small, but I've heard a quote of $500-2k a year in fees per individual to support that option, this was at Fidelity. Best thing to do is put your money in some index funds and get the employer match, then invest outside of the fund. When you switch jobs you can free up that money and invest it in an IRA somewhere.

Worth noting as well, purchased a Swiss stock in my Roth a few years back, cost me $80, $50 for non-DTC cleared and $30 for the over the phone broker trade.

I believe IB is the only one, any reason you're not satisfied with their international trading inside an IRA?

Not that it stopped us (we also have no cable and watch the Steelers OTA) but the Pirates aren't available OTA (or the Penguins, but I've never been a hockey fan). I imagine there are other situations like that. There are ways to work around it, but it's not quite as simple. You in the Pittsburgh area? l get together with some other value investors in the burgh maybe once every other month, I'll add you to the email list if you're interested. In terms of hockey and baseball, my wife purchased the MLB package on the iPad so she could watch the Reds (die-hard Reds fan). I believe we could get a iPad to HDMI cable if we wanted to watch it on the TV. I think there's an NHL package like this as well.