Small Investment Banks in a Pleasing Ramp of Increased Value

Posted On August 27, 2009 | by AllenCaron

A dart-throwing investor would have had a good chance to make money investing in small investment banks recently.  We’ve looked at this specialized sector several times in the past, and of course in the Bad Old Times these stocks were as depressed as any in the market.  But recently the number of multiple-base hits and long balls has been increasing.

San Francisco-based Merriman Curhan Ford (Nasdaq: MERR; http://www.merrimanco.com/) is a case in point.  The full-service investment bank has become the market leader in PAL services for the OTCQX top-end Pink Sheets market, and they have carved out several industry niches, including a strong bid for the smaller deals in the greentech space (near and dear to us).  Recently they have announced some registered-direct deals that look interesting.  MERR shares closed yesterday at $0.63 (about a double from the low), vs a year-high of $1.46, but the stock has been tending to the upside pretty strongly.   Still, the market cap is only $8 million, which may make it worth a closer look.

Houston-based Sanders Morris Harris Group (Nasdaq: SMHG, http://www.smhg.net/) has always had a strong mandate in energy and more recently in alt-energy, and has a very oil-y gas-y customer base.  Recently under the leadership of George L Ball, they have been focusing more on asset management, and have announced their intention to sell off most of the investment banking group to Siwanoy Capital, after taking impairment charges on that group throughout the financial downturn.  SMHG has rebounded to $5.95 after a Feb low of about $3.76 and a 52-week high of $11.07.  Market cap is about $170 million.

Miami-based Ladenburg Thalmann Financial Services (Amex: LTS, http://www.ladenburg.com/), also a full-service financial services and investment banking firm, has also done a near-double from its springtime lows, with shares closing yesterday at $0.75 and a market cap of about $125 million.  LTS has been active in SPACs, and in the placement of public and private debt, and is now the parent of well-regarded healthcare boutique Punk Ziegel.

NYC-based Cowen Group (Nasdaq: COWN, http://www.cowen.com/), after a March low of about $3.59, has rebounded to a close yesterday at $6.70, no doubt due at least in part to its recent deal with Ramius LLC, a large asset manager that has partnered with Cowen (Ramius is now the control shareholder).  But clearly the combination is being seen favorably, and Cowen is a good old name as well — and with some smart bankers in its chosen niches of healthcare, technology, greentech, communications, and aerospace/defense.  COWN shares trade about 150,000 per day, and the market cap is just over $100 million.

Minneapolis-based Piper Jaffray Companies (NYSE: PJC, http://www.piperjaffray.com/) would have been a long ball if you bought it at the springtime low in the teens.  PJC is now trading at $50.65, near its highs, with a market cap just a hair below $1 billion, and daily trading in the range of 210,000 shares.  Founded in the 19th century and later acquired, it was spun out of US Bancorp a few years back, and has an enviable reputation as a full-service investment bank for tech, healthcare, media, telecom, alt-energy and financial services.  Good research staff.  And probably good upside from these prices.

Portland OR-based Paulson Capital Corp (Nasdaq: PLCC, http://www.paulsoninvestment.com/) has rebounded very nicely as well, thank you very much.   After trading as low as $0.80 in late spring, the shares closed at $1.95 yesterday, though admittedly on very low volume.  Longtime leader Chet Paulson must have been smiling when he announced a profit of $0.18 for the 2nd quarter versus a wrenching loss in the year-earlier period, and the company has announced some deals recently in the smallcap, nanocap tech sector that has become a hallmark of Paulson deals.  Paulson also runs the Westergaard Waldorf conferences, founded by brilliant and insightful John Westergaard 30 or so years ago.

A complicated story, but worth studying, is Arlington VA-based FBR Capital Markets (Nasdaq: FBCM, http://www.fbrcapitalmarkets.com/).  FBR, whose initials originally stood for Friedman Billings Ramsey, has been through the wars regarding financial peril, but maintains its position as a high-toned investment bank, though a youngster in a field populated largely by oldsters.  FBCM is trading at $5.27 for a market cap of about $330 million, and trading volume of about 225,000 shares.  FBR recently separated from a company now known as Arlington Asset Management, which is the largest holder of FBCM.  A recently filed registration statement will free up Arlington to divest its holdings, which may mean some significant blocks could be available. 

We never advise people to buy, sell or hold — we simply look at interesting companies and comment on them.  Please look carefully before jumping into the water — make sure there are no rocks under the surface, no alligators, and no toxic substances.  We like the small investment banks; they are full of smart people prepared to take judicious risks, but do your diligence please.

One Response to “Small Investment Banks in a Pleasing Ramp of Increased Value”

  1. free palm pre
    October 24th, 2009 at 1:56 am

    Excellent article, bookmarked for future referrence

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