Wednesday, August 22, 2007

BofA Boosts Banks

Bank America's decision to make a $2B equity investment in Countrywide (CFC) shows that there is value in the banking sector. I still remain cautious about the sector as a whole and would be hesitant to put money to work in the financials. I continue to hold shares of subprime lender Accredited Home Lenders (LEND).

Note: I am long LEND

Tuesday, August 07, 2007

An Accredited Gamble

Today I got long Accredited Home Lenders (LEND). Accredited is a subprime lender that actually has a bid from Lone Star V, a private equity fund. Lone Star bid $400M or $15.10 for Accredited on June 4th. LEND now trades under $7 a share. Technically there is 115% upside from the current price. The fact of the matter is that Lone Star is legally obligated to buy LEND and had all the necessary inside information before making its bid. The deal is expected to close by October but the market is pricing in some risk that the deal won't get done or will be repriced.

Note: I am long LEND

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.