TWST: Given your doom and gloom, are there any names that you do like?
Ms. Gilbert: Yes, there are actually two names, really one that stands out and Ted's referenced it a couple of times in this interview - it's Hudson City. It stands out for the obvious reasons. Here these guys are able to take advantage of the disruption in the mortgage market. They operate a very clean and simple portfolio lender model in a great market with a very disciplined management team, and have the benefit of an excess capital base.
Mr. Kovaleff: Let me ask you this, because that's a company that has acted beautifully recently and if it isn't at its all-time high it is very close to it, where do you see it going?
Ms. Gilbert: That's the thing. I think there still is a lot of value to be had in this company, probably on the mortgage side; I've got projected growth to exceed 30% this year and next year. And given the overhead, it costs them virtually nothing to add an additional dollar of loans. So they have the structure in place to really let the increased volumes add substantially to their bottom line. So the model I think is there. And then, longer term, I think one of the other hidden gems is what they have the potential of doing on the deposit side. People look at it and say, well, it's a residential mortgage lender funded by high cost CDs, ho hum. But I would actually say those CDs (with a 90% retention rate), have some significant value that can be extracted by a potential acquirer. I see Hudson City operating somewhat of a private banking sort of model and for a potential acquirer, if you apply any kind of fee structure to that deposit base, it could be a windfall of revenue. I think we've calculated it to be anywhere from $0.35 to $0.50 a share in earnings. I know my peers downgraded it recently because they rode it into the Fed cut, but again, I think fundamentally, if we look at the earnings stream, I think we're early in the cycle.