Imagine the market reception for an initial public offering of a company that was forming for the sole purpose of investing in mortgage loans.

Actually, you couldn't possibly imagine it because it would never happen in today's financial world. But it didn't sound so strange in 2004, when a company called Sunset Financial Resources Inc. formed in Jacksonville to do just that.

Sunset was immediately profitable after its IPO in March 2004, a rare feat for a new public company. But it ran into trouble even before the mortgage meltdown, with a couple of quarterly losses in 2005. By 2006, Sunset sought a merger into a Philadelphia-based investment company called Alesco Financial Inc., which also invested in real estate-related assets.

Now with the market in complete meltdown, Alesco is seeking a merger itself. The company announced on Feb. 20 an agreement to merge with Cohen & Co., a privately held investment firm that provides management services to Alesco.

Unless you're a financial expert, it's hard to tell how Alesco is performing because of the complexity of its investments. Alesco reported a staggering net loss of $1.3 billion in 2007, but that was a paper loss based on the value of its investments. It actually reported a positive cash flow of $28.4 million for 2007.

It reported a net profit of $67.7 million for the first nine months of 2008. But with its focus on mortgage-backed securities, trust preferred securities and corporate loan obligations, investors have a very uneasy view of the company. Alesco's stock has fallen from a post-Sunset merger high of $11.99 in January 2007 to below $1 in recent months.

Alesco said the merger with Cohen will transfer it from being purely an investment company to an operating company that produces revenue streams, as it adds Cohen's capital markets and asset management businesses.

The merger announcement didn't have an immediate impact on Alesco's stock. It fell by 2 cents to 58 cents on Feb. 23, the first trading day after the merger announcement.

THE BRITISH INVASION

February is a month when investment firms file statements with the Securities and Exchange Commission indicating their major investments in public companies. And from this year's filings, we can see a British invasion has hit Jacksonville.

Barclays Global Investors, an arm of the London-based banking giant, filed SEC statements indicating it owns a 5 percent or higher stake in seven Jacksonville-based companies. That's one-third of all the public companies in Jacksonville.

Barclays' investments range from a 5.01 percent stake in Web.com Inc. to an 8.05 percent share of Landstar System Inc. It also owns pieces of FPIC Insurance Group Inc., MPS Group Inc., PSS World Medical Inc., Rayonier Inc. and Regency Centers Corp.

A Barclays spokeswoman did not respond to an e-mail inquiry about the firm's investments in Jacksonville.

After Barclays, the next biggest investors in Jacksonville are U.S. firms T. Rowe Price and Fidelity Investments (which is not related to the Jacksonville-based Fidelity National companies), which each own stakes in five locally-based companies.

WARNING SIGNS FOR CSX

Speaking of the British looking at Jacksonville, a London stock strategist issued a report recently that includes CSX Corp. among 42 global companies that could cause a "permanent loss of capital" for investors.

James Montier of Societe Generale based his assessment on what he calls "the trinity of risk," as he looks at three financial indicators.

His list consists of companies around the world that exceed certain limits on all three indicators.

One indicator is valuation risk, in which the stock is trading at more than 16 times its 10-year average earnings (CSX was at 24 when he filed his report).

The second is business/earnings risk, in which the company's current earnings per share are at least twice the 10-year average (CSX was at 2.4).

The third indicator is a financial risk score based on a complex formula involving balance sheet data. CSX's score was above Montier's limit on that, also.

The only other company with a significant Jacksonville operation on Montier's list is London-based BAE Systems PLC, which bought Armor Holdings Inc. in 2007.

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