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August 1, 2007


Stock Du Jour (AHM) & Random Observations

Nowhere morning then selling hit in the afternoon.

Notable New Lows: MGIC (MTG), Health Management (HMA) — ticker symbol confusion with AHM? (ha!), LSI (LSI), Akamai (AKAM), and Circuit City (CC).

Notable New Highs: Extremely short list, Under Armour (UA), Heidrick & Struggles (HSII), Shutterfly (SFLY), and Morgan Stanley’s China fund (CAF).

American Home Mortgage (AHM) collapsed rather spectacularly … now is a great time to look for deeply undervalued assets (I’ve already found ten of them). Here are the daily and 15-minute charts for AHM.

AHM daily

AHM 15

This is from about a dozen days ago, (emphasis is mine):

July 20, 2007 9:31 AM ET

Briefing.com - Market Report — Short Stories

American Home Mortgage RBC Capital Mkts reiterates Outperform. Target $25 to $20. RBC notes AHM is down 41% since the end of June due to increasing credit quality concerns, concerns over a possible dividend cut, and eroding market sentiment for mortgage REITs. Firm does expect credit costs to continue to rise, but do not expect increases to threaten the viability of the company, or its access to an ample variety of sources of Wall Street borrowings. Despite expected losses from mortgage banking operations, firm thinks earnings from the REIT will be sufficient to cover a quarterly dividend of $0.60 per share. Firm lowers 2007E/2008E EPS to $1.02/$2.82 from $2.10/$4.00 and their tgt to $20 from $25.

That “ample variety of sources” turns out to be neither ample nor various.

This entry was posted on Wednesday, August 1st, 2007 at 8:02 am (utc+8) and is filed under Trading and Investing.

4 Responses to “Stock Du Jour (AHM) & Random Observations”

  1. Chris said:
    August 1st, 2007 at 9:20 am

    Trading was halted on AHM so it is not a discontinuity in your data. This isn’t an example of a deeply undervalued asset is it?

  2. C. Maoxian said:
    August 1st, 2007 at 9:29 am

    Chris: A trading halt is the ultimate discontinuity. I haven’t looked at AHM’s numbers but I suspect my ten favorite financials are in slightly better shape than this company.

  3. Brian said:
    August 1st, 2007 at 12:10 pm

    Perhaps the first alt-a lender to go bust?

  4. C. Maoxian said:
    August 1st, 2007 at 12:16 pm

    Brian: I guess so, a double whammy: no one will buy their newly originated loans while they’re simultaneously getting hit with margin calls on their existing (collapsing) loan portfolio … a classic “liquidity crisis,” the old run-on-the-bank.

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