HomeFed Stock Buyer Looks at the Long Run

David J. Dunn, founder and general partner of Idanta Partners, describes himself as an “occasional” contrarian who sometimes buys severely depressed stocks with the expectation that, in the long run, they will see rosier days.

Dunn said Monday that Idanta’s recent purchase of 7.2% of troubled HomeFed Corp.’s outstanding shares is comparable to the La Jolla-based investment firm’s 1972 acquisition of stock in two large advertising agencies that were then nearing record market lows. It took the badly battered agencies several years to rebound, but Idanta eventually “made very good money on them,” Dunn said.

Idanta, which in recent weeks has acquired 1.6 million HomeFed shares at prices ranging from $4.54 to $6.675 per share, has also acquired relatively small positions in Wells Fargo and Security Pacific banks.

Idanta’s investment in HomeFed, which was announced Friday afternoon, helped push the San Diego thrift up $.75 to $5.875 on Monday. The stock was trading as high as $33.25 in June, when it reported a sharp increase in bad loans.

Dunn said he has no assurances that HomeFed, Wells Fargo or Security Pacific won’t sink even further.

“I hope to be bottom-fishing now,” he said. “But I learned some time ago that you can think you’re at the bottom and fall through” to a new, lower stock price. Dunn declined to say whether Idanta will acquire additional HomeFed shares.

“I wouldn’t buy (real estate-related stocks) in California unless I was willing to suffer through a continuing downturn and see some decline in values,” Dunn said. “We’re not predicting that the market in real estate is going to turn up this year or even in 1991.”

Idanta, which has never invested heavily in banks or savings and loans, began acquiring financial-institution stock in recent weeks because they are “really undervalued securities,” he said.

HomeFed “seemed to have faced up” to its problem loans by setting aside adequate reserves during recent quarters, Dunn said. “But we have no insights into (the S&L;) other than what we get from reading their reports and commentaries in the newspaper,” he added.

Dunn and Idanta aren’t the only investors hoping to snare eventual profits by bottom-fishing in the generally depressed financial industry.

Warren Buffett on Oct. 24 became Wells Fargo’s largest shareholder by acquiring 5.03 million, or 9.8%, of the giant bank’s outstanding shares. News of the acquisition pushed Wells Fargo stock up $1.375 to $50.50.

Dunn, who cautioned that financial institutions probably are not wise choices for investors who concentrate on short-term gains, noted that Buffett once defined long-term as “forever.”

Dunn said Idanta’s long-term outlook in the stock market often means keeping stocks for as long as five years before trading them. Idanta takes an even longer view in its venture-capital investments, where the partnership maintains holdings for as long as 20 years, Dunn said.

The investment firm’s principal owners are the Bass family of Texas. Idanta, with a total investment portfolio valued at $100 million, is best known for investments in high-technology stocks such as Apple Computer, Sun Microsystems and Intel.

It has also provided venture capital to a number of start-up high-tech firms, including Pacific Communications Sciences of San Diego and Iomega of Utah.

Dunn on Monday repeated that Idanta views HomeFed as an investment, and that the firm has no intention of trying to take over the S&L.;

Dunn said Idanta made the investment without alerting Robert F. Bass, one of Idanta’s investors, who heads the group that acquired Stockton-based American Savings.

“I’d honestly forgotten that Bob was in American,” Dunn said. A Bass representative “called on Friday to remind me of that . . . (but) the Basses are inactive partners, and I’d say it had been years since I’d talked to them.”

Dunn formerly served as chairman of Prime Computer, a Natick, Mass.-based company that Idanta had helped capitalize in 1971.

Idanta remained one of the computer company’s largest shareholders until the firm was sold to a New York investment firm in 1989.