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Tom Brown is the founder and CEO of Second Curve Capital. During 1980s and 1990s, he worked at Smith Barney, PaineWebber and Donaldson Lufkin & Jenrette, and became one of the most respected Wall Street analysts for financial stocks. Later in 1998, he joined legendary Julian Robertson’s Tiger Management and led its North American financial services group. Like many other tiger cubs, in 2000, Brown left Tiger Management and founded his own hedge fund, Second Curve Capital, which only invests in financial stocks. His original fund, Second Curve Partners, has generated a net return of 20% annually since inception.

Below we compiled a list of top 10 positions in the 13F portfolio of Second Curve as of September 30, 2011.

Company Name

Ticker

Value

Activity

PRIMUS GUARANTY LTD

PRS

27791

-20%

NEWSTAR FINANCIAL INC

NEWS

19630

-9%

BANNER CORP

BANR

19622

-5%

CITIZENS REPUBLIC BANCORP

CRBC

18780

-90%

TAYLOR CAPITAL GROUP INC

TAYC

12995

0%

COBIZ FINANCIAL INC

COBZ

12812

-14%

BANCORP INC

TBBK

7479

-4%

MERCANTILE BANK CORP

MBWM

6572

-2%

STERLING FINANCIAL CORP

STSA

4674

-13%

COMPUCREDIT HOLDINGS

CCRT

4619

2%

The portfolio value of Second Curve was reduced from $242 million at the end of June to $151 million at the end of September. The fund also became more concentrated. At the end of the second quarter, Second Curve had 25 positions in its 13F portfolio. It reduced the number of different positions to 17 at the end of September. The fund sold out 9 positions in the third quarter. The biggest position it sold out was Ocwen Financial Corp (OCN), in which it had had $20 million invested at the end of June. Second Curve also sold out its stakes in Bank of America Corp (BAC), Enterprise Financial Services Corp (EFSC), and Hudson Valley Holding Corp (HUVL).

Second Curve mostly invested in small cap stocks. The two positions with over $1 billion market cap in its latest 13F portfolio is Sterling Financial Corp (STSA) and Synovus Financial Corp (SNV). At the end of September, Second Curve had $4.7 million invested in STSA and another $3.6 million invested in SNV. Both stocks performed pretty well so far in the fourth quarter. STSA returned 34.81% and SNV returned 36.79% since the end of September, both beating the 12.17% of SPY by a large margin. Bill Miller’s Legg Mason Capital Management had $11 million invested in SNV at the end of the third quarter as well.

Other large positions in Second Curve’s portfolio include Primus Guaranty Ltd (PRS), Newstar Financial Inc (NEWS), Banner Corp (BANR), Citizens Republic Bancorp Inc (CRBC), Taylor Capital Group Inc (TAYC), and Cobiz Financial Inc (COBZ). We like Tom Brown and his Second Curve Capital. Brown’s expertise in the financial sector is invaluable to a hedge fund that invests exclusively in financial stocks. We encourage investors to do some deep research on the top stock picks of Second Curve.

Source: Tiger Cub Tom Brown's Top Financial Stock Picks