SAN DIEGO (CBS.MW) -- Last time I looked it wasn't a good thing for companies to "manage" earnings. It's one of the issues Fannie Mae just got nailed for.
Yet managing earnings is a way of life at Novastar -- no stranger to this column.
Don't take it from me -- take it from Cole Bitting. He's an analyst at Flagstone Securities and perhaps the most head-over-heels fan of the Kansas City-based subprime mortgage lender; his firm is also one of Novastar's investment bankers.
In an August 2 note to clients, Bitting came right out and explained what Novastar (NFI: news, chart, profile) would do if it "feels compelled to manage" earnings after last quarter's results, which he says were "padded" with gains related to hedging activities.
Manage? Padded? Bitting said it, I didn't. In this case, the company's second quarter benefited from an unusually large hedging gain.