Black Eye for Brown

Tom Brown’s Second Curve Capital had a stellar year in 2006; one of its three investment vehicles gained 68% and its asset management operation was pushing toward the $1 billion mark in assets for the first time since the mercurial analyst went off on his own and hung a shingle. Tom was living the dream.

But the recent woes in sub-prime lenders and the resulting contagion in all things financial hit Brown’s position sheets hard. Indeed, by the end of March Brown’s funds were down nearly 30% year-to-date, which often means death to hedge funds as panicky investors pull funds and the death spiral accelerates.

This weeks implosion at First Marblehead (FMD-NYSE) added further insult to Brown’s injuries. On Wall Street when it rains it pours. And 2007 has got to be testing Brown’s mettle.
If Second Curve is to rebound this year, Brown is going to need investors to show the same kind of faith they put in him during that personal crisis. Of the 17 stocks Second Curve had money in at the end of 2006, all but three are trading lower this year. And that doesn’t include its ill-timed investment in Accredited Home Lenders Holding (LEND), a mortgage lender that has been hit hard by the meltdown in the subprime lending market.

We have long admired Tom’s chutzpah and writing since his DLJ days. But he has dug a deep hole that could prove tough to extricate himself from. Will Tom survive this?

Matthew Goldstein of Business Week is not waiting around to find out… go read his article about Tom Brown and Second Curve here
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