Posts from the ‘Impac Mortgage (IMH)’ Category

May 9

Updates on a few positions during a very busy week

This last week has been jam packed full of news, earnings and outsized moves. I don’t think I have ever had as many 10%+ days for stocks that I own (or have recently owned but unfortunately sold) as I did in the last week. While some of these moves do not seem attributable to any specific news (such as First Mariner and Atlantic Coast Financial) most of them do. And while I have not had time to fully digest all of the news (I haven’t had time to review what announced spin-off for IDT and so therefore won’t be touching on that) I did want to discuss the stocks that I have reviewed and can comment on in the paragraphs below:

MBIA (MBI)

I sold out of MBIA in all but one account about two weeks ago, which is unfortunate timing given what has transpired. Nevertheless I had my reasons, they remain valid, and you gain little by looking back at bad luck. When the stock dipped into the $13’s on the day of the announcement I was really surprised, I mean the Bank of America deal was what we had all been waiting for, but I took advantage of the opportunity and loaded up the truck with stock. Therefore MBIA is a large position for me right now – it seemed very close to a sure bet in the mid-13’s and so I bought 11% position, going on some margin to do so.

At some point shortly I am going to have to reduce that position (I’m uncomfortable with it being this large) but I am waiting for at least the conference call tomorrow to do that. And what I do with my shares will really depend on what is said – in particular what management says about structured unit on call. They may come out and say that they have commuted the worst exposure, the unit isn’t going to regulator, and they expect to realize ABV of $10 from it. In that case maybe MBIA is worth quite a bit more than National alone. We shall see. Read more

Mar 10

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Week 88: Take-off (MTG, RDN, MBI, PKI, NTI, IMH, WD)

Portfolio Performance

See the end of the post for Portfolio Composition and weekly trades.

A week of Significant Gains from RDN, MTG, MBIA

The last seven days have been extremely good ones for my portfolio. This has been primarily due to the price appreciation of MGIC, Radian Group and MBIA. As regards MGIC and Radian, I have written so much about these two names, done so much work trying to understand the business (and trying to understand how other people were trying to understand the business), that it is quite rewarding to see it play out the way that it has.

It is amazing to me that MGIC has more than doubled (from a $2.40 low to a $6.10 high) during 5 days when the only notable disclosure was that the company had the ability to raise capital. Someone with an interest in market psychology should really write a piece on MGIC – you could call it the Existential Security.

I reduced my position in both Radian and MGIC by a little more than half during the early part of this week. My sales of MGIC occurred around $5.20 while those with Radian were at a little over $10. I don’t have plans on selling any more of either.

I sold the positions down because they were getting very large (particularly in the case of MGIC) and because my thesis, that these companies would be able to survive, has now played out. What is going to drive the stocks going forward is the long-term potential of the mortgage insurance business and how well each company can capitalize on it. Read more

Jan 27

1 Comment

Is the Gain on Sale Boom over?

Earlier this week my portfolio was rolling along nicely, having closed at an all-time high on Wednesday night with me looking forward to further gains ahead.

And then Flagstar reported their fourth quarter results.

I don’t own Flagstar. I don’t even follow Flagstar. They are a Michigan based bank that has had some problems in their past and, most importantly for this discussion, run a reasonably large sized mortgage operation. In the fourth quarter Flagstar reported a big decline in their gain on sale margin, from 244 basis points to 153, and the Street took it to mean that the mortgage origination boom was over. In addition to the carnage of Flagstar (down about $2.50 to $15.57 on Thursday), PHH Corp, Impact Mortgage and Nationstar all took it on the chin.

But while the headline decline was steep, there is more to the story. During the conference call Flagstar provided some clarity. The following exchange between Matthew Kerin, the president of the Mortgage banking division, and Paul Miller of FBR is instructive (via SeekingAlpha). Read more

Nov 24

Those who know it best…

There was a time when I was a big commodity bull.

Now just to clarify, I am still somewhat of a commodity bull. I like some oil stocks, I like a gold stock or two, I think natural gas is going to surprise to the upside and I’m looking at the lumber stocks. But there was a time, back in 2004 and 2005 and even 2006 when I was a real China growth story commodity bull. I was all about copper and zinc and nickel and demand for those metals from China.

Well that was another time but there are lessons to be learned. Here is an anecdote that has relevance today. Around the end of 2004 I was trying to figure out if I should get into Aur Resources. Aur was a Canadian stock mined copper in Chile. I remember it was around this time of year that I was looking at the stock, and it had just moved higher yet again. So I liked what I saw about the company, and I really liked the idea that we were near the beginning of a super-cycle in the base metals, but there was this problem – the stocks had jumped significantly. Aur Resources was a $2 stock that had quickly become a $6 stock in the past year.

And what’s more, the insiders were selling.

I remember this, because at the time I was pretty new to investing and from what I had read insider selling was a really bad red flag. If the insiders didn’t want the stock, and I mean they knew everything there was to know right, there must be a disaster around the corner.

I don’t have all the statistics from 2004, but here is a list of insider sales I dug up from January 2005, available from the Northern Miner. Take a look; its mining company after mining company, some of them with directors and executives selling hundreds of thousands or millions of dollars worth of shares. It was a rush to the exit. There is Aur Resources, along with other names like Inmet Mining, Teck Cominco, Inco and so on, all with big sales. Read more