A handful of high-profile investors staked out new and increased positions in selected U.S. banks in the final months of 1994, taking advantage of the general downturn that afflicted the sector.
And as often is the case, word that a well-known investors had bet on the institutions was enough to steady their share prices, while other bank issues continued to decline.
Philanthropist Walter H. Annenberg's decision to increase his stake in Wells Fargo & Co. before Halloween sent the stock soaring.
And fellow Wells investor Warren Buffett's new position in PNC Bank Corp. sent the shares up 4% in one day just as the company was being rocked with disclosures of heavy securities writedowns.
"There was a lot of bottom fishing going on," said a Wall Street analyst. "And it certainly has an immediate impact. The market assigns value to how these investors spend their money."
But it is not just low equity prices that attracted these investors but strong fundamental institutions, said a shareholder adviser, who requested anonymity.
Banks with strong fundamentals will emerge from the pack and attract savvy investors, he said.
But there is also a sort of self-fulfilling prophecy when an investor of the magnitude of a Buffett or an Annenberg invests, said Scott Edgar of SIFE Trust Fund, which invests in financial institutions.
"They prop up the stock price," he said. "If they are willing to put up a couple hundred million dollars of their 'personal' money, that signals to other investors they can invest their smaller amounts of money in those companies."
First Fidelity Bancorp. received a double boost recently with news Mr. Annenberg in November had bought a 5.7% stake in the company and that a Spanish bank intended to increase its holding in First Fidelity.
In a Securities and Exchange Commission filing last month, Banco Santander Sociedad Anonima de Credito, said it wanted to boost its stake in the Lawrenceville, N.J., bank from 24.9% to 30%.
That disclosure helped convince Hancock Institutional Equity Services analyst, Gerard S. Cassidy, last Thursday to upgrade First Fidelity from "sell" to "hold."
"Banco Santander has made a commitment to this investment and it has paid off extremely well thus far," he said.
Mr. Cassidy also cited the improving northeastern economy for the upgrade. But at $44.625, the stock was still too overvalued to merit a "buy," he said.
If Federal Reserve approval is forthcoming, the Spanish company will buy First Fidelity shares throughout 1995, and thereby support the bank's stock price, Mr. Cassidy explained.
One Wall Street analyst disagreed with this assessment, arguing that unless the new stake was far more sizable, Fidelity shares would not receive a boost of any kind this year.
"The amount of trading activity that goes on in the equities of a bank that size is such that if one institution increased their position it would have to be just enormous to have a material, long-lasting effect on the stock price," he concluded.
But Mr. Edgar said any time a high-profile investor takes a large stake, the market sits up and takes notice.
Wells Fargo shares to a large extent have greatly benefited from Mr. Buffett's presence, Mr. Edgar said.
Only three banks performed better than Wells Fargo in 1994, according to SNL Securities.
In general, Mr. Buffett and Mr. Annenberg are passive investors, content to watch their holdings grow over time.
But Banco Santander's intentions are not as clear. In 1991 the company was rumored to have bid for a Florida thrift being sold by the Resolution Trust Corp., the $2.5 billion-asset Florida Federal Savings and Loan Association.
One observer, citing the Florida bid, questioned whether Banco Santander may be interested in acquiring a U.S. bank.
But Mr. Cassidy said Banco Santander had indicated its investment in First Fidelity was for investment purposes only, and not to take it over.