Wednesday, August 01, 2007

So Much For American Home Mortgage (AHM)

In March I believed that American Home Mortgage (AHM) was safe from the subprime fallout and I wrote positively about the stock on March 18th. I wouldn't touch the stock now. I did say to realize profits on March 21st. I admit I was wrong about AHM and in today's current environment I wouldn't touch any stock that has a residential mortgage unit.

Some Stocks to Avoid
  • Annaly Mortgage (NLY)
  • Countrywide (CFC)
  • Freemont General (FMT)
  • Impac Mortgage Holdings (IMH)
  • NovaStar (NFI)
  • Redwood Trust (RWT)
  • Thornburg Mortgage (TMA)
  • Wells Fargo (WFC)
Note: I have no position in any of the above stocks.


Blogger Peter said...

You can add Accredited Home Lenders Holding Co. (LEND) to the list.

8/02/2007 8:33 AM  
Blogger Larry said...

Just bought LUM at 6.50 Friday [First purchase -- and I'm not affiliated.] From their 7/30/2007 Press Release:
Luminent Mortgage Capital, Inc. Confirms Second Quarter Dividend Payment of $0.32 per Share Secure, Full Compliance With All Financial Covenants, and Ample Liquidity. Luminent Mortgage Capital announced today that its second quarter dividend payment of $0.32 per share, payable to stockholders on August 8, 2007, is secure and will not be canceled.
In addition, Luminent confirmed that as of July 30, 2007 it is in full compliance with all its financial covenants. Furthermore, Luminent confirmed that as of July 30, 2007 it had ample liquidity to manage its business.
Luminent reiterated that it is an investor in, and not an originator of, mortgage loans. As such, Luminent is not subject to the loan repurchase risk that is currently impacting certain loan originators. Instead, Luminent purchases high quality mortgage loans from originators, and only after Luminent conducts exhaustive due diligence on each and every loan. As of June 30, 2007, Luminent's 15,327 of whole loans had a weighted-average FICO score of 715, a weighted-average loan-to-value ratio net of mortgage insurance of 71%, and 86.4% of these loans were on owner-occupied properties.
In addition, Luminent reiterated that it employs a disciplined and sophisticated hedging program for the interest rate and credit risks in its portfolio using Eurodollar futures, interest rate swaps, swaptions, interest rate caps, and by shorting various portions of the ABX indices as well as employing single-name credit default swaps. During the quarter ended June 30, 2007, the strong performance of Luminent's credit hedges more than offset the income statement and balance sheet impact of mark-to-market pricing and certain impairment charges related to its credit sensitive assets. This strong performance of Luminent's disciplined hedging program was one of the contributors to the increase in Luminent's book value per share to $10.05 as of June 30, 2007.

8/04/2007 10:41 AM  
Blogger Yannick said...

Yup AHM is really a fiasco. I had bought some a bit before your initial recommendation. I was pretty enthusiastic at the moment as the mortgage held by the company were 'merely' Alt-A which was considered safer, although its stock got beaten as if it was a subprime lender. Unfortunately I didn't sell when you recommended to take a profit. I was able to limit the pain by exiting the stock when I read that even Alt-A mortgage defaults were on the rise and credit deteriorating, leaving M&T Bank with problems 'refurbising' its mortgages on the market. With the dividend at the time I was pretty much break even.

Now I decided to leave the mortgage business aside and instead bought some AXP friday on the dip. American Express is still posting excellent results amid the current credit crisis. I believe its clients have a better credit score and the company should not be heavily impacted. Of course I will follow the thing careful, as I did with AHM :-)

8/04/2007 12:31 PM  
Blogger Yannick said...

One last thing, I was very shocked to see AHM go bankrupt just a couple of weeks after the CEO bought shares of the company himself for around 24$ each if I recall correctly. That is very scary to me as it means that even the CEO of a company is not always able to understand the risks of his own business. Go figure.

8/04/2007 12:35 PM  
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8/04/2007 11:56 PM  
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Watch out SWC on monday for earnings release after hour. Crooks knocked down SWC from $16.47 to $8.56 in less than 3 months, for no good reason. Maybe they want to sell the remainder to Russians cheap?

Deeply oversold, I expect a blowout SWC quarterly earning, and from here SWC MUST have a dramatic reversal and a great rally on the good earnings. Don't let go of the opportunity!

8/05/2007 8:42 AM  
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