Wednesday, May 8, 2013
Since the downturn over 40% of all mortgages issued in the US were through the FHA program. Now that the housing market has stabilized the government seeks to reduce its role. To that end, FHFA has increased incentives NOT to obtain loans from the FHA program by mandating that on June 3, any mortgage obtained through FHA where the purchaser puts less than 20% down at purchase will be required to pay private mortgage for the life of the loan, regardless of LTV (loan to value) of the property. This is a far cry from the previous rule of mandated PMI for 5 years and 80% LTV. Why? The government is trying to revive the private mortgage insurance market. Radian Group is one of the largest private mortgage insurers that will benefit from this government pullback. After suffering huge losses in the financial crisis, there are tailwinds for the company. The company is well reserved, the delinquency rate of the legacy portfolio is rapidly declining, and the company maintained national operations ready to handle the volume of work that will be available. Most importantly, earnings from new mortgages is now outpacing the losses from old mortgages. The author has purchased RDN at will buy RDN at $13/share.
Posted by Lockstep at 4:34 PM
Monday, December 3, 2012
Daddys and daughters. One of those two is hopeless in the gaze of the other. So for my daughters birthday she wanted a new doll. Not any doll, an American Girl doll. I happen to think Disney's business model takes lessons from the Branch Davidians and Jamestown to keep their following loyal. I found another business very similar. American Girl. $100 for the doll. Extra $20 to get the doll's hair done. Another $10 for a "facial" for the doll. There was a line at the "makeover counter" to do this. I did not see anyone get the facial. I might have started reading the book of "Revelations" for other signs of the apocalypse if I had. So I need to know who is making this killing? Mattel. The makers of Barbie. Diversification has been long coming. I looked at the financials. Great. Steady income growth and a modest P/E ratio. Plus the look my daughter gave when she walked away with her doll. The author bought shares at $37.15.
Posted by Lockstep at 9:12 AM
Thursday, November 29, 2012
Recently I opened a stock market account for each of my kids. Might as well start teaching them early, right? I asked my son what he wanted to buy first. "Fedex". I asked why? "I like the stores." We recently spent time there faxing, printing, and producing publications. He bought a combination lock with his own money. I guess it was a high point. So I took a look at Fedex. A dead stock for the past two years, there is much to like. Over the last two years earnings have been growing at a 30% rate as the company cut costs, shifted services, and most importantly benefited from the recovering economy. The brand is intact. The potential federal cuts to the postal service and the long term increasing use of online retail purchases all bode well for delivery services like Fedex. TheStreet.com expects a 5% increase in net operating income YOY this quarter. Considering the current p/e ratio of 13.9, it is underpriced to the S&P 500 p/e of 17. I like the reliability of FDX earnings, so the p/e seems low. Overall, I think my boy made a good choice. I will follow him. Will buy FDX JAN 14 $87.5 calls at $11.30 and sell FDX JAN 14 $90 calls at 9.95. Spread of $1.35 with a upside of $1.15.
Posted by Lockstep at 9:32 PM
Friday, September 14, 2012
Not quite. But the pessimism is over done. The valuation of sub $50B given the potential ad revenue (mobile and desktop) is too cynical for a platform with 500m active users. What turned the table for me is the hope and promise of the new Facebook Exchange. This tool sells real time data on user interest and then sells the add spots related to that subject. "Facebook is doing a better job than Google Inc. (GOOG) in getting Web surfers to click on advertising based on browsing history, according to some partners using Facebook Exchange. Facebook Exchange, or FBX, generates as much as four times the return on ad dollars than other real-time bidding systems, said Triggit Inc., which makes software tools to help Facebook deliver the ads. Another partner, AdRoll, said advertisers used to getting $10 for every $1 they spend are making $16 for every dollar spent on FBX." If Facebook is able to garner even part of the promise of this enhancement of the platform, the valuation will skyrocket from here. Unfortunately, based on the authors personal 'user experience' with Facebook, this investment is still a opportunitistic trade on the markets enthusiasm for high potential concepts rather than an intended long term holding. The author has already initiated a position in Facebook at $21.90.
Wednesday, September 12, 2012
Ryland avoided the worst of the housing crisis due to geographic diversity in it's land portfolio, and selective development. Since then Ryland Homes has waited for turnaround in the market.
Posted by Lockstep at 1:41 PM
A recent arrest of one of the top bankers in Vietnam is identified as the catalyst of recent swoon in the price of VNM. "Then came news of the arrest of two noteworthy Vietnamese banking scions, headlines that dealt a blow to investor confidence in the country's banking system. What is ironic is that Vietnam is a former French colony and it is the French that have a term for these kind of unforeseen events. 'Force majeure,' or act of God, is arguably not an exaggeration when comes to the impact recent events in Vietnam have had on VNM. The arrest of tycoon Nguyen Duc Kien, one of the founders of the Asia Commercial Bank, has struck fear in the hearts of investors that previously had not been shy about embracing VNM or Vietnamese equities." Read more: http://www.minyanville.com/sectors/emerging-markets/articles/investing-in-vietnam-vietnam-ETF-ETFs/8/29/2012/id/43611#ixzz26H2Na9Fl Yet the banking sector remains strong. "What is lost amid all the negativity now surrounding Vietnamese financials is that the country's banks had $575 million in excess cash as of mid-April." Thus the banks are very well capitalized and there has been no major economic policy changes. The author is still very optimistic on Vietnam and looks at this as a great entry point for Vietnam.
Posted by Lockstep at 9:33 AM
Wednesday, August 29, 2012
New locations are emerging as investment hot spots, Vietnam is one of these places. "In an interview Wednesday, Søren Skou, head of the container-shipping division of Denmark's A.P. Møller Maersk A/S, said the Chinese market is facing fundamental changes. "It's pretty clear China is losing competitiveness in a number of industries," he said, adding that China is "by far the most important market for what we do." Maersk's customers who ship shoes, toys and other labor-intensive goods are increasingly located in countries like Vietnam and Bangladesh, he added." Vietnam is open for investment through the Vietnam market index (VNM). This author is long VNM at $16.75.