SKYWALKER 2046

Just jumpped into the trading world

推动网易狂涨60倍的神秘金手指-2003 report 2009/05/23

市场也许就是这样奇妙。

  一年以前,大家都还在讨论新浪(SINA.NASDAQ),搜狐(SOHU.NASDAQ),以及网易(NTES.NASDAQ)是否因为会因为股价太低,而被美国证监会取消上市资格,“扫地出门”。

  如今,三大中文门户网站一改往日“颓废”,历经数年连续亏损,目前中国互联网三大门户网站在相继实现盈利之后,终于激情燃烧了一把。其股价一路飙升,成为NASDAQ炫目的三颗明星。

  在明星的身后,NASDAP出现了三只神秘的手掌Driehaus、ALKEON、DRESDNER RCM。

  Driehaus守得云开月明

  在中国三大门户一路猛涨,国内投资者普遍质疑这纯属投机炒作,认为三大门户股市行情已经脱离Nasdaq市场本身,其背后疑有主力操作。

  武汉证券分析师余凯则旗帜鲜明地认为,其背后有人炒作的可能性很大。他认为,在纳斯达克,目前网络科技股放量走强,eBay、yahoo都有良好表现,整个纳斯达克已回升了三到四成。

  余凯指出,经济持续高速增长的中国、三大门户概念股扭亏转盈,正好应时而生,自然会受到追捧。但也值得注意的是,这几只股票都属于小盘股,投机比较容易,只要有几千万美金就可以把股价“炒飞起来”。再加上网站宣布扭亏为盈,有题材可以发挥,股价随着公司方面频频利好而节节盘升。

  搜狐、新浪和网易2002年前三个季度成交量都非常低,无论是股价还是成交量大幅度的提升是从2002年第四季度开始的。三家网络公司上市至今,一直较少主承销商后续的研究和分析推介。事实上,目前大多数投资银行都还没有为这几家网络公司设立专门的分析员。

  根据NASDAP资料显示,Driehaus公司在中国三大门户网站的机构持股人中都名列第一,在2003年3月31日分别掌控网易、搜狐和新浪4.41%、4.33%和 4.41%。

  Driehaus公司何方神圣,它是炒作三大门户的主力吗?该公司总部注册于芝加哥,持仓总市值是17.8亿。专门为机构客户、高净值个人和共同基金投资者提供投资管理服务。但按照EdgerOnline的资料,截至2003年3月31日,该基金拥有的网易股票升值了66%,但新浪和搜狐仍然亏损了26.42%和16.39%,据此推测,该基金应当是在NASDAP上一轮网络高潮时建仓,不幸被套,终于可以在2003年第一季度等到解套机会,也算是守得云开见月明吧,从3月31日到现在,该机构持有的股票又都有翻倍的回报。

  从网易、搜狐、新浪的机构增仓表(从2002年12月31日到2003年3月31日)上,也可以看出,这三个月,Driehaus公司增持比例有限分别增长了63.66%、16.39%、26.42%。

  真正杀将出来的黑马很多。在2003年3月31日的十大机构投资人中,有7家是此前完全无一股股票的新手,来势凶猛,而且配合默契。而搜狐就更加生猛,增持比例超过1000%和全新投资人达到8家,新浪也有7家。

  在这些新鲜出笼的机构投资者中,不乏大机构如DRESDNER RCM,分别持有网易、搜狐、新浪市值别为565.7万(第9)、1073.6万(第3)、610.9万(第8)美元,而其兄弟公司DRESDNERBANK也持有搜狐1073.6万美元(第4)、网易565.7万美元(第10)。它显然是搜狐狂涨的主力。此外,LEGGMASON公司、VEREDUS都是持仓数百亿美元的大机构,比较起来,三大门户网站在其中的比重就太小了,大机构只是略微关注中国概念。

  神秘ALKEON引领爆发

  最为引人注目的是一家小机构,同时抢进为搜狐第二与网易第三机构投资人的一家叫作ALKEON资本管理的公司:注册于美国纽约曼哈顿大厦350号,截至2003年3月底,仓位总市值6.06亿美元。为网易第四大机构投资人,持股市值1216万美元,是搜狐的第二大持有机构,持股市值1085.6万美元,新浪第9大股东,持有市值478万美元,有趣的是,其持有这三支股票的数量与这三支股票的股价成正比,可以将之看成此轮炒作的领导指标机构。该资本管理公司重仓于IT类企业,仓位比例51.2%,其他行业涉猎平均。

  在新浪新投资者构中排位最高(总排位第4)是VEREDUS资产管理公司:注册于美国路易丝韦尔,仓位总市值12.26亿美元。该资产管理公司业务注重金融领域的拓展,其仓位中金融衍生产品比重为28.6%,服务类23.1%,IT类11.9%,金融类10.3%。整体操作风格比较迅猛,仓位集中,为一家中小型侧重金融衍生工具的机构。

  “这证明了中国资本界对此轮操作者的基本判断:这些介入的基金公司大多是比较冒进的基金,属快进快出的那一种。因此美国投机型的基金和机构在操作网易、搜狐和新浪方面是主力,而小型机构是否与国内资金乃至与三大门户网站有默契就不得而知了。”一位资深分析员说。

  而更有消息渠道证实,一些来自中国内地的庄家也积极参与了网易的炒作。甚至有坊间笑谈–逃往国外的庄家吕梁纠集一伙资金组织了这次三大门户的炒作。

  香港国泰君安一位高层人士透露,来自北京的先知先觉的机构是这次炒作的主流资金,因为近水楼台的关系,北京机构是最早知道三大门户网站扭亏为盈,也是这波行情中最早介入的资金。来自浙江和深圳方面的资金则是短线跟风盘。

  但对于网易后面是否有人在炒作,丁磊不置可否。从223年5月21到6月11日,丁磊控制的SHINING GLOBEINTL通过高盛减持了88万股网易的股票。

  郎咸平:不排除炒作可能

  “不能排除有资金在炒作这三支股票的可能性。”以“郎监管”闻名的香港中文大学教授郎咸平这样指出。

  不过,郎咸平认为:仅从这三支股票的图形上来说,目前也无法确认有“庄家”正在进行炒作这一说,因为假设性还太强。如果这三个中国门户网络股票的价格涨幅远远超过了美国同类高科技股票的价格涨幅,或是盈利居中,但市盈率远高于市场水平,才有可能被怀疑市场上有人为炒作的因素在里面。

  “也赚到钱的小股东不会进行投诉。”郎咸平进一步指出:在这种的单边上涨中,一直在稳定的上升,股价没有大幅度的波动,最多只能算作是有市场投机力量进入。如果有基金大笔买进,也可解释为对中国概念的网络股“情有独钟”,属于正常的投资行为,美国的证券监管当局也不会有太大的举动。

  “通过单边上涨这样的方式操纵股价,美国证监会最终是以‘私下和解’的形式解决。”不管是用什么方法获得赢利,如果股价稳步上升,或是稳定下降,都不会引发监管当局的注意力。但是,一旦股价崩盘,有大幅下跌的情况,大笔抛售股票的机构一定会受到美国证监会的关注,要求做出合理解释。通过这种方法,以防止不正常的市场炒作行为。

  投机泡沫VS.价值回归

  围绕三大网络股的定价合理与否的问题,华尔街已经展开了激烈的争论。

  著名的BARRON’S杂志首先发难,严重质疑三大网络股的股价。BARRON文章中指出,尽管三大网络股成功的幸存下来,并成为了各自领域的第一门户。但它们的定价过于昂贵。

  如果按照2003年的预测EPS计算,在互联网行业以外的其他行业中,一些顶尖的高成长公司,像AMGEN、是巴克咖啡等,也仅有30~37倍的市盈率。而科技行业的领先公司–微软、INTEL、CISCO,仅有20~30倍的市盈率。

  同时,BARRON’S还进一步置疑互联网的增长潜力,认为传统大公司进入网络电子商务的竞争压力、即将实施的对网上交易征税的政策,都将大大影响三大网络巨头的增K潜力。

  不过,华尔街追棒网络股人士则对BARRON’S 的观点大加反驳,THE STHEET.COM就发表了一篇文章,逐条批驳了BARRON’S的观点。

  “这应该算是一种价值回归吧。虽然涨了很多倍,但是按每股收益计算,这三个门广网络股的动态市盈率并不算太高。”国泰君安证券公司的行业公司部副经理邵健如是说。

  对于所谓的三大中国网络股股价异常,邵健则不以为然。邵以动态市盈率为例举证,2003年eBay、YAHOO的动态市盈率分别为70~75倍、100倍左右;而网易、搜狐和新浪的动态市盈率则分别为35倍、60~70倍、55倍。

  “与国外网站相比,我们市盈率并不高,而且还有更大升值空间。”邵说,言词之中略有喜悦之情。

  在记者追问下,邵承认,在低价位时(约l美元左右)他曾购下新浪及搜狐的股票,为此获利不少。

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What Social Security’s Underfunding Means for Your Retirement 2009/05/14

by Emily Brandon
Thursday, May 14, 2009
provided by

Social Security and Medicare’s annual checkup revealed that the recession and longer life expectancies are taxing the health of the entitlement system. The Social Security Board of Trustees report found that program costs will exceed tax revenues in 2016, a year sooner than predicted in last year’s report. The trust fund will be exhausted in 2037, four years sooner than the 2008 estimate. Here’s a look at how the projections could affect your retirement plans.

 Smooth sailing for the baby boomers. In 2037, the year the trust fund is currently projected to be depleted, the youngest baby boomers, currently age 45, will be 73. It’s highly unlikely that baby boomers will face a rise in the retirement age or cuts in benefits. “The good news for current beneficiaries and those nearing retirement is that your benefits will remain secure and intact for the foreseeable future,” says Nancy LeaMond, executive vice president of AARP, a lobbying group for older Americans.

Changes for younger people. Social Security and Medicare will still be around for younger generations. But there is some uncertainty about whether there will be tax increases, benefit cuts, some combination of the two, or other fixes to correct the underfunding. “You can sort of count on the fact that if there are any changes in benefits they will be in a downward direction, and then individuals like us will have to provide more of our own income through our own personal savings and our employer-provided plans,” says Bruce Schobel, president-elect of the American Academy of Actuaries. “I think it’s a very safe bet that in the process of restoring financial soundness, the government is very unlikely to expand the benefits.”

Making up the difference. Social Security currently replaces about 41 percent of preretirement income for most Americans when they retire. Americans without traditional pensions who want to maintain their standard of living after retirement need to save whatever amount they need above that on their own. We don’t know exactly how the government will recalibrate the retirement system to fix the shortfall, so younger Americans can’t calculate precisely what their retirement benefits will be. But it can’t hurt to save or invest a little extra cash in case benefit amounts decrease.

Longer life expectancy. In addition to the recession, Americans’ increasing life expectancy is contributing to the depletion of the Social Security trust fund. “Americans are living slightly longer than we’d previously assumed,” says Andrew Biggs, a resident scholar at the American Enterprise Institute and a former deputy commissioner of the Social Security Administration. “Increased longevity means more people collecting benefits for longer, which is a recipe for larger deficits.” Americans now generally live 17 to 19 years after age 65, up from 12 to 13 years in 1940. The Obama administration has said it does not have plans to raise the retirement age and instead favors plans to raise Social Security payroll taxes for those making over $250,000 a year by 2 to 4 percent (combined employer and employee), but a future administration could. Younger workers may want to plan to work a few years past their current full retirement age, 67, for their own financial security. Working just an extra year or two is one of the quickest ways to pad your retirement accounts and reduce the number of years over which your savings must be spread. Plus, under current law, Social Security payouts increase for each year you delay signing up between age 62 and 70.

Making Medicare healthy. Medicare’s funding ailments are expected to occur even sooner than Social Security’s. Projected annual assets for the hospital insurance portion of Medicare are expected to exceed expenditures by 2012. The hospital insurance trust fund is expected to be exhausted by 2017, two years earlier than projected in last year’s report. Medicare Part B, which covers doctors’ bills and other outpatient expenses, and Part D prescription drug coverage are more adequately financed in the short term, but increases in healthcare costs over the long term will average 6.4 percent annually and require increases in enrollee premiums and general revenue funding.

Most current retirees will not be subject to large premium increases in the short term because of a law that limits premium increases to the dollar amount of the annual increase in Social Security benefits. A Congressional Budget Office report predicts that there will be no cost-of-living increases for Social Security beneficiaries in 2010 through 2012, which also means no Medicare Part B premium hike for the majority of beneficiaries. But new enrollees and current beneficiaries with incomes above $85,000 this year ($170,000 for couples),who make up approximately one quarter of Part B enrollees, could be charged unusually large premium increases over the next two years. Premiums for Medicare Part B and D and the prices for out-of-pocket medical expenses not covered by Medicare are likely to further increase in the future.

 

The Problem with Debt

The Problem with Debt

Posted May 14, 2009 09:00am EDT by Henry Blodget in InvestingRecession,BankingHousinG

 

The par value of U.S. corporate bonds affected by downgrades hit a high of $522.4 billion

Filed under: U.S macro economy,us stock market and listed companies — rogerwang2046 @ 00:10


Fitch Ratings-New York-13 May 2009: The par value of U.S. corporate bonds affected by downgrades hit a high of $522.4 billion in the first quarter (up from $391.5 billion in the fourth quarter of 2008), resulting in a downgrade rate of 14.5%, as the financial and economic crisis continued to take a toll on corporate credit quality, according to a new Fitch report.

The first quarter of 2009 also saw another unwelcome milestone as the share of U.S. corporate bonds rated ‘AAA’ fell below 1% of market volume while the share of ‘CCC’ rated issues moved up again to a new high of 6.8%. In total, the ‘AAA’ category saw $176.2 billion in downgrades while the ‘AA’ category featured an additional $142.1 billion.

Overall, downgrades affected 14.5% ($426.4 billion) of investment grade U.S. bond market volume in the first quarter while upgrades affected 0.3% ($9.1 billion). On the speculative grade front, the effects of negative and positive changes were 14.8% ($96 billion) and 1.7% ($10.8 billion), respectively.

A positive development in the first quarter was a strong rebound in issuance, tallying $184.9 billion following dismal third- and fourth-quarter 2008 activity of just $80.8 billion and $74.4 billion, respectively. While an impressive turnaround, this strength came from highly rated, defensive industrial names. Financial and speculative grade issuance remained very low.

The new report, titled ‘U.S. Corporate Bond Market: A Review of First-Quarter 2009 Rating and Issuance Activity’, offers additional details on issuance patterns, rating activity by broad market sector and industry, and bonds coming due. The report is available on the Fitch Ratings web site at www.fitchratings.com under ‘Credit Market Research’.

I

 


 

Options Trader: Thankful Friday -May 08, 2009 2009/05/10

Options Trader: Thankful Friday 

May 08, 2009 | about stocks: DIA / FAZ    

I am very happy we cashed out.

We cashed out our longs, as planned, very close to the top and yesterday, at 1:47, I sent out an Alert to Members titled: “Not Being Greedy With May Shorts” in which I said: “At this point, with our put plays all back in black – we need to start stopping out if they get the market back over 8,400 (our goal was to get to cash and this is a gift). With a 50 point Dow trailing stop if we head lower than 8,360. Ideally, we should be out of any May puts (or May anythings) and cautious about June. If it’s a real sell-off, we use the cash to scale into June puts (which would include FAZ calls of course).” That was a FANTASTIC call (if I do say so myself) as we bottomed out at 8,358 at 3:33, by which time we were already cashed out ahead of the usual stick save.

It was a perfect day as we stuck with our plan from Wednesday night to press our short bets into the gap up open we expected, and we’re now in cash and are likely to day-trade a few short-side bets this morning but cash is still going to be king going into the weekend. This will be a short post as I am already working on our next round of bank plays for members as we also cashed out most of our sample $100,000 Hedged Portfolio ahead of the stress tests and are itching to take up some new positions so I wrote a new post entitled “Stress-Free Investing In Stress-Tested Banks” with plenty of new entries we’ll be looking to make into next week.

The Jobs report showed a loss of “only” 539,000 jobs but last month was revised up 69,000 which everyone seems determined to ignore. Unemployment is up 0.4% to 8.9%, the worst since Sept 1983. If the government hadn’t added 72,000 jobs (mostly census workers) this would not be at all pretty so we will be shorting the Dow at the open as a day trade and taking off our put covers against our long DIA puts, perhaps recovering into the weekend if we get a nice sell-off.

Oil is back at $58 so we’ll be shorting that into the weekend (I’m shorting the futures now below $58 with a stop there) as Toyota (TM) and Honda (HMC)gave poor reports with poor outlook. We know our auto industry sucks but if those two can’t sell cars either then the people buying oil are certifiable and we are happy to take their money.

Asia was up a point and Europe is up about 1.5% on bank fever but I see projected losses of up to $599 (not $600) BILLION by our 19 largest banks alone if the economy does not improve. So forgive us if we hold onto our cash over the weekend while we wait for people to sober up.

Have a nice weekend.

 

ABB战略180°大逆转 2009/05/09

ABB战略180°大逆转

作者:王 晨    来源:21世纪经济报道    日期:2005-9-8 20:44:00  

11月20日,瑞士苏黎世。在这个欧洲的滑雪圣地,有一大群人似乎对一份财务报表更感兴趣,却对屋外的美丽雪景毫无兴致。
  当这群神情严肃的绅士们走出大会议室的时候,不知道ABB集团全球执行委员会的大老板们会是什么心情,脸上又会是怎样的表情。
  不过令人松一口气的是,传来的是好消息———或许是ABB在这个寒冷的“财务冬天”等到的惟一一条好消息———在特别股东大会上,申请由股东们给ABB注资25亿美元资本金的计划被批准了。
  在该计划中,ABB将以每股4瑞士法郎的价格,在斯德哥尔摩、伦敦和法兰克福证券交易所,发放8.4亿股的新股。
  这个特别股东大会上,一共有一千二百多位股东出席,所持股份达到了ABB总股本的48.7%,可见ABB的“病情”多令人关注。

  减债是硬道理

  巨人病了,而且病得不轻。这位曾几何时的电气巨人,已经病到了不能自己造血,需要股东再次大量输血的地步。而且,除了失血过度以外,ABB还正在变得越来越小。
  财务表现上,算上2003年第三季度的财务报表,已经是ABB的连续5个季度亏损了,而且,在2002年度开始亏损以前,在2001年ABB也发生亏损15亿美元。据彭博信息报道,ABB计划把债务从目前的82亿美元水平削减一半至40亿美元。目前ABB的净资产已经缩水至不足10亿美元。
  就在股东大会招开的前一天,ABB成功地出售了8年期的6.5亿欧元(近7.5亿美元)的公司债券,以部分偿还2003到2010年需要支付的65亿美元债务,还与银团签订了为期三年、金额达到10亿美元的新信贷协定。
  经营业务上也是坏消息。更早之前的10月29日,ABB公司在发布2003年第3季度财务报告的时候,发布了一条连自己都觉得很痛苦的消息———ABB计划通过出售石油设备生产部门以削减负债并提高资本金。摩根大通公司的投资子公司JPMorganPartners、康多富投资(CandoverInvestments)和3i集团拟最多出资9.75亿美元收购ABB的石油设备部门。
  这已经是继出售金融服务与发电业务以后,ABB再一次出售非核心业务了。曾经包括发电、输配电、石油化工,到保险、金融服务和工业IT服务的全球业务,最终将仅剩下输配电及工业自动化这两大核心业务。
  ABB估计,退出飞机及汽车租赁,楼宇系统,以及在中国石化、瑞士出口信用公司等公司的投资权益,可以在短期内给ABB集团带来8.6亿美元的现金,而退出石化及其它投资项目,在长期内可以为ABB带来20亿美元做减债之用。而在去年9月,ABB集团已经以35亿瑞士法郎的价格,向通用电气公司出售了金融服务部门。
  尽管大规模的出售非核心业务,高昂的债务所引发的高额利息还是让ABB有些举步维艰,2003年第三季度的季报显示,仅利息支出就达到1.28亿美元,而当季的息税前收入仅2.62亿美元,一半被沉重的债务吞没,另外一半,则被那些所谓的“不再继续的业务”所吞没。
  11月初,ABB集团全球执行委员会成员包利华来到中国,有记者提问关于ABB发电方面的业务,包利华略有些窘迫地说,ABB已经退出了发电业务。不过在中国广东省的一个风力发电试验站还会继续下去。
  “不过,我们已经看到了希望的曙光。ABB在出售完不盈利的业务以后,所保留的输配电业务和自动化业务是两个盈利非常可观的业务,而且订单还在增加。这两个业务都很大,每年的收入各自接近100亿美元,所以我们已经看到了走出低谷的希望。”在接受本报记者专访的时候,ABB中国高级副总裁陈达平对上述问题做了解释。
  ABB2003年第三季度的数字表明:自动化技术和电力与能源两大主要业务的收益达到了38亿美元与43亿美元,电力业务的订单上升了21%,工业自动化的订单上升了16%,而息税前盈利也达到了2.38亿美元和2.94亿美元。2003年的头九个月,ABB通过大力实行压缩成本策略,节省了4.2亿美元的成本,还在全球内削减了5600名员工。
  他指出,ABB近年的持续业绩不佳,起因是由于“石棉案”所带来的巨额赔偿压力拖住了ABB的脚步。

  石棉案

  1989年11月,前ABB集团CEO巴列维决定以16亿美元收购美国燃烧工程公司(CombustionEngineering)。
  20世纪70年代,燃烧工程公司生产以石棉作为隔热材料的工业锅炉。后来,人们发现石棉是致癌物质。生产这种锅炉的员工以及在工厂里负责烧锅炉的工人陆续以身体健康受损害为由,要求该公司赔偿。ABB提出收购时,燃烧工程公司就已官司不断。然而,急于拓展美国市场的ABB高管没有看到问题的严重性。
  石棉案带给ABB的总计损失近12亿美元。ABB在美国的子公司美国燃烧工程公司(CombustionEngineering)因此而宣布破产保护。
  在和解方案中,除了CombustionEngineering的800万美元资产要赔光之外,ABB需要付出近11亿美元的赔偿,其中还不包括额外的3.5亿美元的现金,以及近5000万美元的ABB股票。有近10万的石棉案索赔者批准了这一方案。在2004年到2009年,ABB将会分批付出这些现金赔偿。
  和解方案已经在今年7月10日,被美国的DELAWARE破产法庭所批准,7月31日,地区法院也批准了这一方案。下个月的16日,第三CIRCUIT上诉法庭将会就此事做出最终的裁决。
  虽然12亿美元损失已经被ABB作为坏账拨备掉了,但是未来还需要付出1亿美元的代价。季度年报显示,石棉案带来的亏损依然高达1.22亿,包括股份调整带来的6700万美元损失,以及未来5000万美元债务折净现值以后带来的4100万美元损失。

  过度并购以后的消化不良症

  过度并购是ABB深陷债务困境的主要病因之一。前任ABB集团CEO巴列维在任期间共进行了150多起收购,业务遍及100多个国家,共运营着1000多家公司,最多时员工总数达21.5万名。
  截至2001年底,员工数量仍有16万人。ABB集团的经营范围涉及发电、电力传输和配电、建筑技术、自动化控制系统、油气、化工技术、金融服务、IT等等,还争取过3G手机牌照。
  在股市狂热的时候,股民的投资比较容易取得,大量的并购增加了ABB公司的营运收益和市场价值,但是最高决策层接着犯的错误就开始将ABB推到现在的深渊。
  2000年,ABB股票价格处在高峰的时候,董事会决定了一项股票回购计划。当时动用了大量的资金在市场上回收ABB的股票。但之后,由于全球经济低迷,加上“9·11”事件的冲击,ABB股票价格不断下滑,使ABB账面资产大幅缩水,出现严重亏损。到2001年底,ABB集团亏损已达6.91亿美元。
  2001年开始,ABB就开始为自己制定了“瘦身计划”,开始重组其全球企业结构,原有的业务部门被合并成四个新的客户部门,即公用事业部;流程工业部;制造及消费品部;石油、天然气及化工部。另外还有动力技术产品部和自动化技术产品两个部门,其主要目的是提高客户数量及公司从客户中获取利润的能力。与此同时,ABB集团也实施了裁员1.2万人的计划,希望通过这些措施每年节约成本5亿美元。
  2002年ABB继大规模的出售非核心业务外,还为自己定下了到2005年每年削减8亿元成本的计划。2003年和2004年,ABB为自己的重组计划还需要分别付出3亿及2亿美元的成本。

 

M3 Funds: U.S. Banking Sector Remains Undercapitalized

William Waller and Jason Stock, founding partners of M3 Funds, recently wrapped up their presentation at the Value Investing Congress, entitledBanks: Have We Seen the Worst of It? The following are our notes.

M3 Funds: Investing in Under-followed Banks

  • Manage a long/short equity fund focused on the U.S. Banking Thrift Sector. M3 focuses on under-followed banks. There are 1,300 publicly traded banks, 5,500 private banks, 700 mutual banks and 7,900 credit unions. M3 focuses on publicly traded banks—93% of which have a market cap below $500 million. Jason believes he has a competitive advantage in investing in under-followed banks.
  • He views a bank as a leveraged play on the market in which it operates. M3 conducts research on individual banks through extensive travel, public records searches, private banks and credit unions, FDIC data—call reports, real estate agents and developers.

State of U.S. Banking Sector

  • Sector is significantly under-capitalized. This is the sector’s #1 problem.
  • Credit quality has deteriorated and will continue to deteriorate.
  • The number of bank failures is accelerating.
  • Tangible equity/asset ratios have “fallen off a cliff” in 2007-08 and are 4%-5% vs. historical levels of 6%-7%. These ratios are not sufficient to handle the losses that will come in the future.
  • Total delinquencies: Construction 12%, 1-4 Family 8%, CRE 2.6%, C&I 2.8%, consumer 5%.
  • Jason says that call reports are the best way to analyze banks.
  • Where we are headed: Commercial real estate (CRE), consumer loans (auto, credit cards)—have yet to see meaningful deterioration on many banks’ balance sheets. Auto loans have held up rather well but he’s starting to see deterioration in this category of loans.
  • Jason sees a significant amount of bank failures in the future. There have been about 30 bank failures YTD. He sees this number rising to 150+ by the end of the year. He said that regulators might be overwhelmed (not enough staff) and thinks that they could shut down over 100 banks right now if they had enough people.
  • Can TARP, TALF, PPIP, accounting changes help? They will help some banks, but not all.

State of Commercial Real Estate

  • Unemployment will continue to rise and commercial real estate is the next shoe to drop.
  • Roughly 25% of all CRE is securitized, most of which was originated between 2002-07 and is now beginning to come due.
  • CRE vacancies are rising—commercial foreclosure process is just beginning, which will impact all commercial values and CAP rates.
  • The primary problem areas include: retail strip centers and office.

Investment Approach: Criteria for Long Positions

  • Low price to tangible book value, excess capital
  • Low loan to deposit ratio
  • Attractive markets (looks at real estate and employment trends—likes state capitals and university towns for longs since these provide a very stable job base)
  • Bearish management team
  • Share repurchase plan
  • Attractive deposit base
  • Excess capital is the number one statistic that M3 focuses on
  • Jason also said that a bank’s biggest asset is its liability base (deposits) and a bank’s biggest liability can be its asset base (loans)—he views the deposit base as a hidden asset.

Long Investment Idea: First of Long Island (FLIC)

  • $1.25 billion asset bank headquartered in Glen Head, NY.
  • 140% of tangible book value and 11x LTM earnings. Hidden value in branch ownership would increase TBV by 15%.
  • Excess capital: 8.5% common tangible equity/assets.
  • 68.5% loan to deposit ratio—very disciplined underwriter. $1 billion of high quality deposits with a 1% cost. Pristine credit quality: very low non-performing assets at 3/31/09.
  • Near term catalyst: Russell 2000 addition requires 400K+ shares.

Investment Approach: Criteria for Short Positions

  • Overstated or declining tangible book value, thin capital structure
  • Negative credit trends—rising early stage delinquencies, out of market exposure—high severity loss markets
  • Bullish management team
  • High-cost deposit base and wholesale funding
  • Aggressive underwriting—high growth rates and risky securities portfolio

Short Investment Idea: FNB Corporation (FNB)

  • Do not think it’s a zero, just trading too high given credit risk they have.
  • Trades at over 2x tangible book and 20x LTM earnings.
  • Thin capital structure—4.5% common tangible equity/assets ($357M). $294 million of loans in FL of which 50% are land loans.
  • Credit quality is deteriorating—over 2% of assets are non-performing.
  • High severity of loss on the FL exposure—reserves are insufficient.
  • Loan mix—33% consumer, 30% CRE, and 20% C&I.
  • The company should trade down to book value and will need to raise additional capital in the future.

Key Takeaways

  • The U.S. banking sector remains under-capitalized.
  • Commercial real estate and C&I loans pose a serious threat to the banking sector.
  • The Fed’s current actions are creating long-term risks for the banking sector and the broader economy. Common stockholders are at risk in the majority of banks.
  • Recommendations for investors: Find a niche and become the ultimate expert. Utilize technology and creative strategies to gather information. Timing the market is difficult; develop a firm thesis and be disciplined. Manage risk well—never concentrate a portfolio in one investment. Always ask yourself if you have a competitive advantage. Don’t just read it or hear it—go see it for yourself.
  • Q&A: Which banks do you think are zeros? Very small, obscure community banks would be high on the list. He thinks that Citigroup (C)and Bank of America (BAC) common shareholders could potentially get wiped out.