Marketocracy Makes Banking Bets

05/09/2003 12:00 am EST


Ken Kam

CEO, Marketocracy, Inc.

"The m100--who are the top performing virtual fund managers followed by Marketocracy --has been increasing its exposure to financials over the last few months, making the sector its largest portfolio weighting at 25% of total assets. Here are some of the m100’s favorite picks in the industry:

"Carver (CNY NYSE) is a small thrift based in the Harlem neighborhood of Manhattan. The company enjoys a ROA of 0.83% and ROE of 9.61%. Yet it currently trades at only 83% of book value. Top ranked m100 members have said that this company will remain in their portfolios up to about $20 per share, at which point they may start taking profits. Fair value for this stock is pegged at between $20-$22 per share.

"About the only thing I don’t like about this stock is that it is thinly traded. Teche (TSH NYSE) has a P/E of 11.5, a price to sales of 2.24 and a Debt/Equity ratio of 0. It has a good-looking long-term chart and is trading near its 52-week high. You don’t need to know anything more as far as I’m concerned. Thinly traded stocks are a concern though. It is hard to trade out of them with stop loss orders, so that should be factored into any buy decision."

"Despite a large base of assets, BankAtlantic (BBX NYSE) still trades at too big a discount to its estimated earnings. Its ROA and ROE are large enough to warrant a larger premium to book value than it currently carries. These valuation considerations, along with an expectation that banks will perform increasingly well as the economy stabilizes, makes BankAtlantic a pick worth considering."

"EverTrust (EVRT NASDAQ) has several favorable aspects: It’s reasonably valued at 1.3x book value, has a return on assets of 1%, and earnings growth of 25% in the most recent quarter. Also, share repurchases have been announced, coupled with a strong dividend yield of 2%, and a very strong chart. The only negative I see is a P/E of nearly 20, which is on the high side. Overall, EVRT makes sense at current levels."

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