The investment process at Century Management has five pillars: Stocks represent ownership in business, protect the downside, take advantage of market inefficiencies, price determines return and invest for the long run, according to its website.
The market veteran found scarce opportunity in the first quarter of 2013, with a quarter-over-quarter portfolio turnover of 8% and only two new stock buys and three total sell-outs. He seemed to primarily be interested in mortgage companies.
Van Den Berg opted for 742,950 shares of Walter Investment Management (NYSE:WAC), the largest of the new buys, for $44 per share on average, giving it a 2.7% weighting in his portfolio. He likely took advantage of the stock’s approximate 30% price plunge in March when the company released disappointing quarterly and year-end results. GAAP net loss for the year was $22.1 million and $34.1 million for the fourth quarter, compared to net loss of $66.4 million and $3.9 million in the previous year and year-ago quarter, respectively, primarily resulting from a $48.6 million early debt-repayment charge.
After closing on recent acquisitions of Fannie Mae mortgage servicing rights of ResCap and Bank of America and others, Walter Investment services a portfolio of nearly 2 million loans with principal still owed of $245 billion, grown 185% since 2011, and backed by strategic partner Fannie Mae. The company has $566 million in liquidity it plans to use in the first half of 2013 on further purchases and acquisitions.
Walter Investment Management is a residential mortgage industry fee-based services provider whose stock price has appreciated 49% over the past year on a number of acquisitions, including the fourth largest reverse mortgage services and largest issuer of HMBS, Reverse Mortgage Solutions, the originations and capital markets platform of Residential Capital LLC, and retail and wholesale reverse mortgage loan originator Security One Lending.
In the first quarter of 2013, Van Den Berg also bought 355,085 shares of Ocwen Financial Corp, for $39 per share on average and a 1.3% weighting in his portfolio. The stock’s price has run up 136% over the past year, but was particularly volatile in the first quarter. The $5 billion market cap company services and originates mortgage loans, particularly servicing high-risk loans.
The company has been expanding through acquisitions, including Liberty Home Equity Solutions from Genworth Financial (NYSE:GNW), a reverse mortgages company helping seniors, in April, and Homeward Residential Holdings Inc. from WL Ross & Co., the private equity firm owned by Guru Wilbur Ross, in October. Ross then joined Ocwen’s board of directors in March after being named a “board observer” since the acquisition.
In the fourth quarter and full-year 2012, Ocwen earned $65.2 million and $180.8 million in net earnings, respectively, compared to $9.7 million and $78.3 million in the year-ago quarter and full-year 2011, respectively. It also reported record revenue of $236.4 million in the fourth quarter, a 51% year-over-year increase. In the full year, revenue increased 70% year-over-year to a record $845 million. The company’s loan portfolio increased 270% after closing its acquisitions for the year to almost $470 billion in value. The company believes its revenue, earnings, cash flow and earnings will continue to increase in growth in the future as a result of the acquisitions.
Also in the fourth quarter Van Den Berg sold out of two computer hardware companies, Perceptron Inc. (NASDAQ:PRCP) and Molex Inc. (NASDAQ:MOLX), and one business services company, ABM Industries Inc. (NYSE:ABM).
To see more of his trading activity, visit his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Arnold Van Den Berg.