Through The Fly's Eyes: Tom Brown
Good Stock Ideas From Tom Brown
Tom Brown, CEO of Second Curve Capital and owner of the Bankstocks.com website, gave some excellent ideas in this weekend's Barron's interview.
Brown's favorite ideas include:
* CompuCredit (CCRT), a subprime credit card and automobile lender. Brown likes the growth prospects in the automobile lending business and CompuCredit's overcapitalized balance sheet. CompuCredit has over $700 million of excess liquidity that could be put to work to grow shareholder value.
* Capital One (COF), which trades eight times 2007 estimated earnings should attract interest from investors. By 2007, credit cards will be only half of the company's earnings. Investors have been upset with Capital One due to fears that Capital One might be masking a slowdown in its credit card operations by getting into the full service banking business. Brown says that investor perceptions will change and the company will become viewed as a "rapidly growing diversified institution."
* Renaissance Re (RNR), a play on higher reinsurance rates in the aftermath of Hurricane Katrina. Higher premiums and less hurricanes should lead to stronger than expected earnings for the reinsurer.
Brown's picks are often very volatile but work out over time. As the inverted yield slows the economy down, these stocks should hit some bumps in the road. Buying Brown's idea when fear and panic is high has proven a very profitable strategy.