mrmarket
12-04-2003, 03:46 PM
Now on the street tonight the lights grow dim
The walls of my room are closing in
There's a war outside still raging
you say it ain't ours anymore to win
I want to sleep beneath peaceful skies in my lover's bed
with a wide open country in my eyes
and these romantic dreams in my head
There’s something about that wide open country thought that makes me think expansively. Actually it makes me eat until my stomach grows expansively. My ass is getting as wide as Tennessee…actually it’s getting Countrywide.
Today I bought CFC (Countrywide Financial Corp) at 106.88. I will sell it in 4 to 6 weeks at 123.84. Here’s why I like CFC:
Countrywide provides mortgage banking and diversified financial services in domestic and international markets. Mortgage banking businesses include loan production and servicing principally through Countrywide Home Loans, Inc., which originates, purchases, securitizes, sells, and services primarily prime- quality loans.
CFC is up 120% in the last 12 months yet its P/E is a microscopic 7.1, A very safe play says $$$MR. MARKET$$$.
Now everyone out in TV land is saying that $$$MR. MARKET$$$ must be on crack cocaine. Why would anyone want to buy stock in a mortgage company when it is obvious that interest rates have begun their climb? I’m not going to hold CFC forever, only til it reaches my target. So here’s my plan. What are people going to be doing for the next 3 weeks? Yep..shopping. And how are they going to pay for all of their gifts? Yep..credit cards. And how are they going to pay off their credit cards next month when they get their Visa bills??? Rutro,,,,
Correctamundo….We will see a wave of home equity loans in February when people have to pay off their Christmas bills. The last vestiges of refinance holdouts, presumably the financially incompetent, will dive into cheaper money to rid themselves of their Mastercard and Discover misery.
Remember, the 30-year fixed mortgage rate is still among the lowest in 40 years. Much better than paying 19% on your credit card.
And many homeowners may rush to purchase or refinance as they see rates rising, giving another boost to the sector. $$$MR. MARKET$$$ continues to believe that if rates are going up, it's because the economy is getting better. That's a better situation than having lower rates. I'll take 8% rates with a strong economy instead of 5% in a bad economy any day. People buy more houses in a strong economy and the home sales need to be financed. Don't expect housing to collapse when rates do climb.. Historically low rates may be a big reason for continued strength in the sector, but in recent years housing has also been buoyed by poor investment alternatives, tight home supply, and changing demographics. The sector has had a history of boom and bust cycles but it doesn't look poised for a bust anytime soon. Sales of new and existing homes remain at near-record highs. There is no bubble.
CFC has capitalized on this environment big time:
• 2003 Earnings Guidance Revised Upward To $16 - $18 Per Diluted Share
• 2004 Outlook Provided, With Earnings Per Diluted Share Expected To Be $12 - $16
• Board Increases Cash Dividend To $0.20 Per Share And Announces 4-For-3 Stock Split
Highlights from the last earnings report:
• Earnings per diluted share for the third quarter reached a new record of $7.70, an increase of 181 percent over the prior record established last quarter, a gain of 343 percent over the third quarter of 2002, and 19 percent higher than EPS for the 2002 full calendar year.
• Return on average equity was 63 percent for the third quarter, up from 19 percent for the third quarter of 2002.
• Earnings from Diversified Businesses totaled $648 million year-to-date, surpassing the $373 million earned for all of 2002 by 73 percent.
"To summarize, the third quarter benefited from record mortgage banking and diversification earnings, as well as net impairment recovery that equated to $1 per diluted share," Mozilo concluded. "While this quarterly level of profitability is unlikely to recur in the near future, the outlook for the Company is strong, as indicated by the earnings guidance we are providing. Management believes the Company will report earnings within a range of $16 to $18 per diluted share for calendar 2003, contemplating a range of 10-year Treasury rates of 4.0 to 4.5 percent for the remainder of the year."
The boss is pretty confident. Why shouldn’t he be? Today’s interest rates are almost exactly the same as what they were a year ago, but CFC has pumped in some big numbers and has seen their stock price more than double. I’ll take that again next year. Home purchases will be relatively stable. Refinancings will eventually plummet, but total mortgage debt outstanding will continue to go up. People still buy homes, just at a lesser pace than now.
Management also believes earnings per diluted share for 2004 will range from $12 to $16. Key assumptions in the 2004 forecast are as follows:
• Ten-year Treasury rates of 4 to 6 percent.
• Origination market of $1.4 to $2.4 trillion.
• Countrywide origination market share of 13 to 15 percent, implying Company origination volume of $182 to $360 billion.
These are all reasonable economic assumptions. Furthermore, October was still a red hot month for new home sales. CFC is going to blow away 4Q earnings estimates of $3.80/share. $$$MR. MARKET$$$ sees them carding $5.60/share to make 2003 earnings a whopping $18.48/share. Wall Street will have a hard time keeping their P/E below 7, especially if the homebuilders continue to smash their numbers. 7 x 18.48 is a stock price of 129.36/share which is well past my target. Even if CFC only does the low end of their estimates, a PE of 10 sends their stock price to 120. Don’t forget they can also raise their dividend with all of the cash that comes piling in.
In addition, the Board declared a 4-for-3 stock split to be effected as a stock dividend payable on December 17, 2003 to stockholders of record on December 2, 2003. Bullish bullish bullish…Did you ever think that a 4 billion dollar company could double its sales in one year?? Insane?!!
In addition to excellent loan production, CFC has posted strong gains in its insurance, capital markets, global and banking businesses in recent quarters. CFC's efforts to diversify its earnings base will serve it well as it navigates the ebbs and flows of the cyclical mortgage business. Diversified Businesses include the operations of Capital Markets, Banking, Insurance and Global, and accounted for 15 percent of consolidated pre-tax earnings for the third quarter of 2003. Diversified earnings in aggregate grew 146 percent in the third quarter on a year-over-year basis. These are the quality earnings which are going to help CFC grow even when the Goldilocks refinance environment recedes. CFC has undertaken a diversification initiative to reduce earnings cyclically, as mortgages provide a declining share of consolidated earnings. It plans to leverage its mortgage platform to develop its other businesses. "Our base business - home mortgage lending - has grown steadily for decades," said Stanford Kurland, chief operating officer of Countrywide. "What is cyclical is refinancing. Diversification smooths out our revenue. And diversification not only takes the form of businesses we have started, but product diversification as well. We've added or expanded to our core competencies with products like home equity lines of credit and our entry into subprime lending."
Countrywide's Insurance segment includes Balboa Life and Casualty Group, whose companies are national providers of property, life and liability insurance (yo Adrian!).
It really doesn’t make sense to quote the amazing financial windfall that CFC landed in 2003. No sane person, including their boss expects it to continue. "Business will shrink, no question about it," said Chief Executive Angelo Mozilo. "There was a tremendous boom in originations because of the historically low interest rates." (Do you think Angie Mo got teased when he was a kid?) The good news is that Wall Street has this priced in already with the ridiculously low P/E ratio of 7.1. Any surprises can realistically only be on the upside.
CFC is not sitting on their hands either, as they continue to take market share away from their competitors without even cutting into their margins. An expanded sales force played a big role in building share, Mozilo says. Countrywide's tech prowess also helped. Its technology lets the company make loans quickly and efficiently, and its online loan system is a big plus with brokers. But Mozilo has said he wants to get to 30% of the U.S. market. That would put the firm's share at around $2.5 trillion.
Big Mo cannot be stopped. He will crush everything in his path. He is making so much money, his ass is getting fat. It’s getting as big as Tennessee. It’s getting Countrywide.
The walls of my room are closing in
There's a war outside still raging
you say it ain't ours anymore to win
I want to sleep beneath peaceful skies in my lover's bed
with a wide open country in my eyes
and these romantic dreams in my head
There’s something about that wide open country thought that makes me think expansively. Actually it makes me eat until my stomach grows expansively. My ass is getting as wide as Tennessee…actually it’s getting Countrywide.
Today I bought CFC (Countrywide Financial Corp) at 106.88. I will sell it in 4 to 6 weeks at 123.84. Here’s why I like CFC:
Countrywide provides mortgage banking and diversified financial services in domestic and international markets. Mortgage banking businesses include loan production and servicing principally through Countrywide Home Loans, Inc., which originates, purchases, securitizes, sells, and services primarily prime- quality loans.
CFC is up 120% in the last 12 months yet its P/E is a microscopic 7.1, A very safe play says $$$MR. MARKET$$$.
Now everyone out in TV land is saying that $$$MR. MARKET$$$ must be on crack cocaine. Why would anyone want to buy stock in a mortgage company when it is obvious that interest rates have begun their climb? I’m not going to hold CFC forever, only til it reaches my target. So here’s my plan. What are people going to be doing for the next 3 weeks? Yep..shopping. And how are they going to pay for all of their gifts? Yep..credit cards. And how are they going to pay off their credit cards next month when they get their Visa bills??? Rutro,,,,
Correctamundo….We will see a wave of home equity loans in February when people have to pay off their Christmas bills. The last vestiges of refinance holdouts, presumably the financially incompetent, will dive into cheaper money to rid themselves of their Mastercard and Discover misery.
Remember, the 30-year fixed mortgage rate is still among the lowest in 40 years. Much better than paying 19% on your credit card.
And many homeowners may rush to purchase or refinance as they see rates rising, giving another boost to the sector. $$$MR. MARKET$$$ continues to believe that if rates are going up, it's because the economy is getting better. That's a better situation than having lower rates. I'll take 8% rates with a strong economy instead of 5% in a bad economy any day. People buy more houses in a strong economy and the home sales need to be financed. Don't expect housing to collapse when rates do climb.. Historically low rates may be a big reason for continued strength in the sector, but in recent years housing has also been buoyed by poor investment alternatives, tight home supply, and changing demographics. The sector has had a history of boom and bust cycles but it doesn't look poised for a bust anytime soon. Sales of new and existing homes remain at near-record highs. There is no bubble.
CFC has capitalized on this environment big time:
• 2003 Earnings Guidance Revised Upward To $16 - $18 Per Diluted Share
• 2004 Outlook Provided, With Earnings Per Diluted Share Expected To Be $12 - $16
• Board Increases Cash Dividend To $0.20 Per Share And Announces 4-For-3 Stock Split
Highlights from the last earnings report:
• Earnings per diluted share for the third quarter reached a new record of $7.70, an increase of 181 percent over the prior record established last quarter, a gain of 343 percent over the third quarter of 2002, and 19 percent higher than EPS for the 2002 full calendar year.
• Return on average equity was 63 percent for the third quarter, up from 19 percent for the third quarter of 2002.
• Earnings from Diversified Businesses totaled $648 million year-to-date, surpassing the $373 million earned for all of 2002 by 73 percent.
"To summarize, the third quarter benefited from record mortgage banking and diversification earnings, as well as net impairment recovery that equated to $1 per diluted share," Mozilo concluded. "While this quarterly level of profitability is unlikely to recur in the near future, the outlook for the Company is strong, as indicated by the earnings guidance we are providing. Management believes the Company will report earnings within a range of $16 to $18 per diluted share for calendar 2003, contemplating a range of 10-year Treasury rates of 4.0 to 4.5 percent for the remainder of the year."
The boss is pretty confident. Why shouldn’t he be? Today’s interest rates are almost exactly the same as what they were a year ago, but CFC has pumped in some big numbers and has seen their stock price more than double. I’ll take that again next year. Home purchases will be relatively stable. Refinancings will eventually plummet, but total mortgage debt outstanding will continue to go up. People still buy homes, just at a lesser pace than now.
Management also believes earnings per diluted share for 2004 will range from $12 to $16. Key assumptions in the 2004 forecast are as follows:
• Ten-year Treasury rates of 4 to 6 percent.
• Origination market of $1.4 to $2.4 trillion.
• Countrywide origination market share of 13 to 15 percent, implying Company origination volume of $182 to $360 billion.
These are all reasonable economic assumptions. Furthermore, October was still a red hot month for new home sales. CFC is going to blow away 4Q earnings estimates of $3.80/share. $$$MR. MARKET$$$ sees them carding $5.60/share to make 2003 earnings a whopping $18.48/share. Wall Street will have a hard time keeping their P/E below 7, especially if the homebuilders continue to smash their numbers. 7 x 18.48 is a stock price of 129.36/share which is well past my target. Even if CFC only does the low end of their estimates, a PE of 10 sends their stock price to 120. Don’t forget they can also raise their dividend with all of the cash that comes piling in.
In addition, the Board declared a 4-for-3 stock split to be effected as a stock dividend payable on December 17, 2003 to stockholders of record on December 2, 2003. Bullish bullish bullish…Did you ever think that a 4 billion dollar company could double its sales in one year?? Insane?!!
In addition to excellent loan production, CFC has posted strong gains in its insurance, capital markets, global and banking businesses in recent quarters. CFC's efforts to diversify its earnings base will serve it well as it navigates the ebbs and flows of the cyclical mortgage business. Diversified Businesses include the operations of Capital Markets, Banking, Insurance and Global, and accounted for 15 percent of consolidated pre-tax earnings for the third quarter of 2003. Diversified earnings in aggregate grew 146 percent in the third quarter on a year-over-year basis. These are the quality earnings which are going to help CFC grow even when the Goldilocks refinance environment recedes. CFC has undertaken a diversification initiative to reduce earnings cyclically, as mortgages provide a declining share of consolidated earnings. It plans to leverage its mortgage platform to develop its other businesses. "Our base business - home mortgage lending - has grown steadily for decades," said Stanford Kurland, chief operating officer of Countrywide. "What is cyclical is refinancing. Diversification smooths out our revenue. And diversification not only takes the form of businesses we have started, but product diversification as well. We've added or expanded to our core competencies with products like home equity lines of credit and our entry into subprime lending."
Countrywide's Insurance segment includes Balboa Life and Casualty Group, whose companies are national providers of property, life and liability insurance (yo Adrian!).
It really doesn’t make sense to quote the amazing financial windfall that CFC landed in 2003. No sane person, including their boss expects it to continue. "Business will shrink, no question about it," said Chief Executive Angelo Mozilo. "There was a tremendous boom in originations because of the historically low interest rates." (Do you think Angie Mo got teased when he was a kid?) The good news is that Wall Street has this priced in already with the ridiculously low P/E ratio of 7.1. Any surprises can realistically only be on the upside.
CFC is not sitting on their hands either, as they continue to take market share away from their competitors without even cutting into their margins. An expanded sales force played a big role in building share, Mozilo says. Countrywide's tech prowess also helped. Its technology lets the company make loans quickly and efficiently, and its online loan system is a big plus with brokers. But Mozilo has said he wants to get to 30% of the U.S. market. That would put the firm's share at around $2.5 trillion.
Big Mo cannot be stopped. He will crush everything in his path. He is making so much money, his ass is getting fat. It’s getting as big as Tennessee. It’s getting Countrywide.