Is Countrywide a contrarian/value play
November 14, 2007
By: 
Arohan
Category: BAC, CFC, Investing
Appears that the Soros fund has bought into Countrywide
Soros Fund Management reported in a filing with the U.S. Securities and Exchange Commission its holdings as of Sept. 30, which included a $33.9 million investment in Countrywide
On Sep 28th CFC stock closed at around 19. The subprime meltdown was in full swing.
Bank of America thought CFC stock at $18 is a good value. CFC is now trading at $13-$14
Does Countrywide now present us with enough discount on the stock to compensate for the risk that the business may not survive in the long term?
The stock is cheap enough, according to Yahoo trading at about 0.55 Price to Book. The liquidity in the credit markets have also eased a bit
Any investment in CFC today has to be based on a judgement of how much bankruptcy risk remains in the name. Countrywide has restructured its organization as well as the loan portfolio to safer loans and does expect to be profitable going forward. The profits however, may be minimal and will do wonders to inflate the PE ratio, still it will allow it to survive long enough to see the upturn in the housing market. The weak would have died, leaving the market to the survivors. The pot of gold here surely lies at the other end of the housing cycle. How long is this going to be?
And BAC has always coveted CFC, now more so than ever!
Decisions, decisions, decisions …
Related posts:
November 29th, 2007 at 12:38 am
The latest I heard was that Countrywide has asked their attorneys to look into bankruptcy as an option. One of their attorneys let the cat out of the bag during a conversation with an attorney friend.
February 10th, 2008 at 12:46 am
[…] Today CFC was too good to pass up and I bought. This is truly a contrarian/value judgment and goes with my conviction that the stock is severely undervalued […]