More on Thrift Conversions

I wrote Thursday about the mutual conversion trade. This is an investment strategy that has worked regardless of who was in the White House, which party controlled the Congress, or what condition the economy was in at the time. The inevitable market dips and declines were merely inventory creation events that allowed investors to buy at sale prices. The conversion process itself creates bargain issues adding capital to an already strong balance sheet. Most of these are smaller local institutions that are extremely well run in the first place, and would be attractive without the extra capital. As the good folks at FJ Capital pointed out, most of them will be taken over in a few years.

The banking crisis has bought mergers to a standstill in all sectors of the banking industry, including conversion. We now have an excess inventory of converted thrifts that are still public and trading at attractive prices. Most of them fit comfortably with my Trade of the Decade strategy of buying banks with high levels of capital, low loan losses and trade below tangible book value....559 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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