Tuesday, February 13, 2007

LEND and Perry Como

I got my start in radio as Top-40 disc jockey in the 70's, and for a while I also worked for a station that played Big Bands and Standards and enjoy much of the music from that era. Fortunately, I smelled the writing on the wall and realized the better career track was in news and thank God I jumped over to the news side of the business, or I would have ended up like the guy in the Harry Chapin tune W.O.L.D.

Old Perry and his hit Catch A Falling Star comes to mind. Change the Name to Catch a Falling KNIFE to descibe the activity that some are engaging in by thinking now's the time to pick up shares in subprime lenders.

Accredited Home Lenders (LEND) is up 3% today ahead of earnings tomorrow. Ahead earnings the analyst at STFL keeps his rating at HOLD but sure isn't telling anyone to do any bottom fishing (or knife catching). The analyst says the chance of a takeover is small. It should also be noted that the LEND Feb options straddle is trading at more than twice its theoretical value.

4 comments:

Mike said...

I think LEND will make the numbers but will guide much lower as well as take some additional charges for possible loan buybacks. I have done some loans with Accredited before and they were very "aggressive" in their underwriting. Another smaller direct lender that I think will go next is Master Financial. I have seen some of the deals that have gone through there and they make NEW looked very conservative in their underwriting.

Mike

Jim K said...

Thanks for the heads up on Master. Another firm started LEND with a buy the day before calling it best of breed (though they conceded the stock would likely be pressured) so not hard to imagine LEND has the EPS game down pat and would make the numbers. it sure will be interesting to see the extent of the charges they take.

Mike said...

Also did you see the reason why FMT went up today? What a load of crock!!! They stopped doing the 20% "piggyback" part. Supposedly that is only 8% of their business. That is true but that the 8% that get them the other business. If a broker can't go to them for 100% deals anymore then they just lost a great portion of their business as they only do wholesale. Also, without 100% deals, all the recent buyers and refinancers are essentially dead. I can see the credit crunch tightening big time as more and more subprime lenders stop doing the >80% deals. The people buying today and the next few days are going to be toast. The next lender group to look for are the ALT-A as they did essentially what subprime did but with people with less blemish. Once the bottom rungs of the ladder is taken out, the next few rungs are pretty nervous. I am researching who own these Alt-A and how much exposure are there. I know of only one of hand and that is Bear Stearns.

Mike

Mike

Jim K said...

wHEN i WAS just a young lad I had a frog named Freemont... didn't live for very long. these businesses live off the dregs 90 to 100% refi... also no docs, sub 580 fico, etc. what will they do without those 'great' customers to tap into? Lehman is a huge underwriter too. Deutsch Bank is knee deep. Targeting the 'enablers' for short sales is a great way to go.