Two Ways to Play Financials.(stock picking )

Byline: James K. Glassman

On february 27, the day the Dow Jones industrial average fell 416 points, Thomas K. Brown wrote: "One of my favorite Warren Buffett quotes is, 'We simply attempt to be fearful when others are greedy, and to be greedy only when others are fearful.' " Brown went on to add: "Given the level of investor panic lately, I'm feeling very greedy regarding subprime lenders and am especially greedy over subprime mortgage lenders."

The gutsy declaration on Bankstocks.com is vintage Tom Brown. He is chief executive of a New York hedge fund that specializes in financial stocks, and that between its inception in April 2000 and the end of last year produced net returns totaling 227%. Readers of this column may remember Tom Brown as the guy who selected the best performer on my list last year of stocks to buy ("My 10 Stocks for 2006," March). The company was First Marblehead (symbol FMD). Brown trimmed his holdings last year, but he still owns and loves the student-loan specialist. Now he has a couple of new ideas. They are risky investments and represent one of two approaches to investing in financial stocks.

Aggressive picks. Brown got into hedge funds after a distinguished decade spent analyzing banks for a top Wall Street firm. He worked at Julian …