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Lender Processing Services, Inc. Message Board

oldschoolbuilder 19 posts  |  Last Activity: Mar 28, 2014 11:16 AM Member since: Apr 19, 2006
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  • oldschoolbuilder by oldschoolbuilder Mar 28, 2014 11:16 AM Flag

    Ready to roar!

    Community count is expected to go from 32 at Dec 31, 2013 to 58 (up 81%) by mid-year 2015. The mix and geography of homes sold is also shifting to higher priced/higher margin deliveries. The recent deal for 540 lots in coastal California will be a home run...$500 mil incremental revenue at an assumed 12% after-tax margins adds $2 per share in earnings. Stock is at less than 5X 2016 EPS, with high visibility into deliveries as the land and communities are already spoken for through 2016. 10X 2016 EPS = $55-60 WLH stock (maybe 1-2 yrs out). John Paulsen and Tom Brown are big shareholders and management owns 20%. Great land positions in California, Arizona, and Vegas. Balance sheet is ok with no maturities until 2019 and reasonably conservative net debt/cap. Looks good to me.

    Sentiment: Strong Buy

  • oldschoolbuilder by oldschoolbuilder Mar 28, 2014 9:54 AM Flag

    Community count is expected to go from 32 at Dec 31, 2013 to 58 (up 81%) by mid-year 2015. The mix and geography of homes sold is also shifting to higher priced/higher margin deliveries. The recent deal for 540 lots in coastal California will be a home run...$500 mil incremental revenue at an assumed 12% after-tax margins adds $2 per share in earnings. Stock is at less than 5X 2016 EPS, with high visibility into deliveries as the land and communities are already spoken for through 2016. 10X 2016 EPS = $55-60 WLH stock (maybe 1-2 yrs out). John Paulsen and Tom Brown are big shareholders and management owns 20%. Great land positions in California, Arizona, and Vegas. Balance sheet is ok with no maturities until 2019 and reasonably conservative net debt/cap. Looks good to me.

    Sentiment: Strong Buy

  • Reply to

    Next week AGNC will be $18-$19

    by instantwinbutton Nov 29, 2013 11:22 AM
    oldschoolbuilder oldschoolbuilder Nov 29, 2013 12:52 PM Flag

    Man, you are indeed a trader. What happened to the dire predictions?

    Sentiment: Strong Buy

  • oldschoolbuilder oldschoolbuilder Nov 27, 2013 3:54 PM Flag

    But obviously no huge sell-off in AGNC. At 80% of BV plus a 12-15% dividend there is lots of total return upside.

    The company is buying back stock hand over fist.

    Why the henny penny predictions???

    Sentiment: Strong Buy

  • Reply to

    Dividend

    by iguanaman_99 Nov 27, 2013 3:24 PM
    oldschoolbuilder oldschoolbuilder Nov 27, 2013 3:42 PM Flag

    My guess is that it will be around 70-75 cents. Lower leverage and greater mix of 15 yr MBS offset by a slightly longer duration gap. As long as BV holds around $25 (and it should based on stable prices of MBS and swaps QTD) there is good upside from here in the short term.

    Sentiment: Strong Buy

  • I guess enough is enough.

    80% of BV with a highly hedged and de-risked portfolio with a 12-15% div yield looks good enough. Big stock buybacks for a while. Highly accretive and positive for deleveraging/asset optimization.

    Sentiment: Strong Buy

  • Reply to

    What happens when 20 breaks?

    by buyrightone Nov 22, 2013 12:44 PM
    oldschoolbuilder oldschoolbuilder Nov 26, 2013 8:03 PM Flag

    You change your mind every week. 2 weeks ago you were singing AGNC's praises and poo-pooing non-agencies. HTS is you new darling...until it's not.

    Sentiment: Strong Buy

  • oldschoolbuilder oldschoolbuilder Nov 26, 2013 8:00 PM Flag

    IWB--you really are just fear mongering based on what appears to be a technical volume spike across many stocks likely related to the MSCI rebalancing (as per Bloomberg). There was nothing fundamental today whatsoever. Fear is out there but needs to be substantiated at some point and is more than reflected in the valuation. AGNC's portfolio is fairly defensive and highly hedged. Leverage has been reduced as has extension risk. The stock sells at 80% of current BV and yet has a liquid portfolio that it can monetize quickly. It will be buying back stock aggressively. The dividend and the big discount to BV provides a meaningful offset to any moderate potential BV decline when the Fed does taper.

    You keep talking your HTS book like it will totally decouple from other MREITs. Last time I checked HTS has a positive duration gap, 8X leverage, and has 8% downside sensitivity to BV to a 100 bps rate increase. If rates spike HTS' illiquid ARM book will sell-off as well.

    AGNC is the better bet here.

    Sentiment: Strong Buy

  • Check out almost any larger cap stock. There was a huge spike in downward price volume in the last half hour of trading. Also happened in the SPX ETF. Some lighter trading or less supported stocks dropped 1-2% in the last 10-20 minutes. Technical shenanigans. Flash crash on a mini scale.

    Sentiment: Strong Buy

  • A little technical fireworks to end the day. Doesn't change anything fundamentally. $20 stop loss hit and forced 10 mil shares out. Good riddance.

    Same thing happened to NLY at $10.

    10 yr was up a few ticks, MBS was up a few ticks, nothing to see here but some market manipulation meets temporary technical trading shenanigans.

    AGNC will be buying back loads of shares tomorrow.

    Sentiment: Strong Buy

  • oldschoolbuilder by oldschoolbuilder Nov 26, 2013 4:06 PM Flag

    Not sure what happened here but 10 mil shares traded in 5 minutes. NLY too. Others were not impacted. I wonder if it was a large cap thing where someone just needed to sell and did a block trade. The business doesn't change that fast. Treasuries and MBS were both up a few ticks so no change in fundamentals.

    Sentiment: Strong Buy

  • oldschoolbuilder oldschoolbuilder Nov 26, 2013 1:45 PM Flag

    IWB...What do you think earnings will be at HTS in 4Q and going forward?

    I know these guys have securities that roll up the curve, CPRs will be down in 4Q, and there will be some reinvestment of all that cash raised when HTS repositioned in 3Q, probably into higher coupon hybrid ARMs. That's positive for asset yields.

    But at the same time HTS added lots of hedges that were longer duration than their normal ones. So the hedge ratio is 80% vs. 50% previously. Duration of hedges is 3+ years (they added 5 year hedges in 3Q) vs. 2 years previously. So BV value will be better protected if rates rise but doesn't that heavily impact funding costs?

    Higher asset yield but also higher funding costs. Does it translate into 50 cents in EPS? 45? 55? What does your math say? I guess asset leverage is the other unknown--do we go to 7X? Stay around 8X? Buy back stock instead of assets?

    In terms of BV...hybrid ARMS are probably a bit tighter QTD but what about the hedge book? What do you think BV is at a 2.75% 10 yr? How much stock will HTS buy here at 75-80% of BV?

    Thx and good luck.

    Sentiment: Strong Buy

  • Pine River (mgt company of Two Harbors) took its position up from 1 mil shares to 7 mil shares. Check out Steve Kuhn's interviews on CNBC.

    PIMCO went from 1 mil shares to 4 mil shares.

    Gary Kain now owns about 800K shares after buys post earnings in 2Q and 3Q.

    For what its worth.

    Sentiment: Strong Buy

  • Reply to

    My call on AGNC vs others

    by instantwinbutton Nov 25, 2013 3:08 PM
    oldschoolbuilder oldschoolbuilder Nov 25, 2013 3:33 PM Flag

    IWB--you change your mind every 10 minutes and you haven't done the math here. What on earth are you talking about?

    Gary has already moved plenty into 15 yr MBS--higher coupon and seasoned in particular. The ROE on his portfolio is still around 10+% after accounting for the lower duration mix and big hedge book. At the current discount to BV the dividend yield is still 12-14%. I don't understand anything you are saying regarding why it should be a $15 stock or switching back to 30 yr paper, or why the discount to BV should be huge. These are all liquid instruments that should trade relatively close to BV. Otherwise you sell the MBS and buy back stock all day.

    HTS has a higher future yield? Huh? they are investing in hybrid arms that have much lower spreads. HTS will have a lower dividend given the mix of lower yielding assets plus higher hedge costs. HTS also has higher leverage currently. Relative to TBA eligible product hybrid arms are relatively illiquid instruments. While they have a low fixed coupon for 1, 3, 5, 7, or 10 years they are still 30 yr amortization schedule products. There is less rate sensitivity in theory, but these can sell off hard just like anything else when the dealer bid dries up. The return of principal is much faster with a 15 year amortization product even if the CPR is faster initially on the hybrid ARM product. Gary will have a delevered portfolio and preserved capital base in time for higher rates and wider spreads a year or two from now--hence the dividend will go up by then.

    You go in and out of WMC, MTGE, AGNC, HTS, etc. all the time--I'm not sure what the strategy is but good luck.

    Sentiment: Strong Buy

  • Reply to

    15% Yield Selling at 80% of Book Value

    by achilles197474 Nov 22, 2013 5:19 PM
    oldschoolbuilder oldschoolbuilder Nov 25, 2013 11:59 AM Flag

    DG993 = clueless!

    Example:

    Sell $3 bil of MBS at 104, buy back $500 mil in stock at the equivalent of 101.

    Or take principal payments of $4 bil per quarter and buy back $700 mil in stock. You do realize that the portfolio pays off over time, right?

    This would be leverage neutral, nicely accretive to BV.

    It doesn't matter if AGNC has a GAAP or tax loss in the security they are selling. They can use the proceeds to buy back stock. On a per share basis it's positive.

    AGNC has $70+ bil of liquid securities it can theoretically sell (and thus convert to cash). It has about $10 bil in fairly liquid equity capital that the market is valuing at less than $8 bil.

    Buy, buy, buy!

    Sentiment: Strong Buy

  • oldschoolbuilder by oldschoolbuilder Nov 25, 2013 11:46 AM Flag

    Some simple math:

    Assume AGNC's current BV is $25. Remember, there is a dividend to be paid 1 month away--60-80 cents in all likelihood. More dividends to come--probably $2.40-3.00 in the next year.

    At $20 AGNC is at 80% of BV. Total return in the near term is still positive at the current price if you include the dividend to be paid next month. Total return is still 10% over the next year assuming it trades down to $20 one year from now.

    At $21 AGNC is at 84% of BV. That's still very cheap. Total return is 5.5% from here over the next month, 15% over the next year.

    At $22 AGNC is at 88% of BV. That's still cheap too. Remember AGNC bought back 3% of its shares at $22.16 last quarter and there was recent insider buying at around $21.65. Total return is 10.5% from here in the next month and 20% over the next year.

    At $23 AGNC is at 92% of BV. Still a healthy discount to BV. Total return is 15% from here in the next month and 25% over the next year. Not bad.

    So to assume a healthy 15% return from here over the next year AGNC just needs to get to a still pretty large discount to BV that several other MREITs are trading at currently.

    AGNC was at $24 just prior to earnings. Any hints of BV stability should lead a significant narrowing of the current BV discount.

    Get on board.

    Sentiment: Strong Buy

  • AGNC's BV is $25 or so. The stock is at $20.

    In the massive bond market sell-off we had in 2Q, which included significant spread widening, AGNC's BV dropped by roughly $3 per share. But that was when AGNC's leverage was almost 2 turns higher, the portfolio was much more heavily weighted towards lower coupon 30 yr MBS, durations were only 50% through their extension, and market particpants were "off-side" with respect to their taper/tightening positioning.

    Fast forward to today. The bond market may sell off a bit more to maybe 3.50%, but it doesn't seem it like it will happen quickly. Market participants are mostly delevered, better hedged and are no longer off-side. Spreads are already quite a bit wider too. AGNC has taken leverage down by almost 2 turns, transitioned into higher coupon, 15 year, and more seasoned product. Their hedges remain pretty significant. Extension risk is much lower in their portfolio. It is thus unlikely that BV would fall by more than say $1.50 per share in an event when rates went up 50-75 bps and spreads widened 10-15 bps in a short period.

    Simply put, AGNC is now focused on BV preservation.

    Yet the market is now pricing in the risk of even greater BV deterioration than what took place in 2Q. That is the oppty as this event is highly unlikely. AGNC is now aggressively buying back shares at 80 cents on the dollar--essentially paying 101 for its own portfolio marked at 104. The BV accretion is about 1% for every 5% bought back at this price. AGNC is still paying out a great dividend that is based on say a 10%+ ROE, but because of the BV discount of the current share price equates to a 12%+ dividend yield.

    If spreads do gap out and rates rise a good bit AGNC's BV will be better protected given how de-risked and de-levered the portfolio has become but the earnings oppty will also be greater, so the dividend has an upward bias even if BV loses say another 5-10% in a fairly realistic bear case scenario.

    Great time to buy!

    Sentiment: Strong Buy

  • Reply to

    15% Yield Selling at 80% of Book Value

    by achilles197474 Nov 22, 2013 5:19 PM
    oldschoolbuilder oldschoolbuilder Nov 22, 2013 5:41 PM Flag

    Looks pretty overdone, especially as the portfolio risk has come down enormously, rates have already backed up and further extension risk is fairly low.

    A bear case scenario that contemplates a 100 bps sell-off in rates, plus a 25 bps OAS widening, and no rebalancing/risk mitigating actions by the company would mean BV gets hit by 15% or so, and we are trading even lower than that!

    AGNC will be buying back a ton of stock at this stock price. Every 5% of its shares ist buys is 1% accretive to BV and is the same as buying its entire portfolio at a 2-3 pt discount. Imagine paying $101 for a liquid portfolio that trades at $104. A no brainer!

    Plus a 12-15% dividend yield to add to the cushion.

    Buy, buy, buy!

    Sentiment: Strong Buy

  • oldschoolbuilder oldschoolbuilder Nov 22, 2013 5:27 PM Flag

    IWB...I like AGNC much better than HTS here, but HTS is probably too cheap as well and BV is probably up a tad in 4Q for them (but that can change depending on the employment report in early December).

    The issue with HTS is hybrid ARMs are illiquid relative to TBA-eligible mortgages and if spreads gap out in a panic they are a forced seller. You simply can't have that much concentration in the product. Also, asset yields are very low on hybrid ARMs and HTS just added a boatload of medium-long duration hedges that will further dampen NIM. Hence while rate risk is lower so are returns, but the biggest risk is having to sell into an illiquid market. Also remember that hybrid ARMs are still 30-yr instruments and principal repayment is rather slow compared to 15 yr MBS.

    Contrast that with Gary's increased focus on 15 year product, especially higher coupon and seasoned 15 yrs which are much less rate sensitive and de-lever quickly. Gary gets his cash back faster and has less extension and liquidity risk. AGNC's portfolio is much more liquid than HTS' so he can sell MBS to buy back stock if he wants. Also, cash flows from 15 year MBS are much higher given that the principal repay rate is much greater and that also enables him to buy back shares or invest in higher yielding stuff if the environment allows it.

    AGNC at nearly a 20% discount to BV is an unbelievable opportunity, particularly as their portfolio risk has fallen enormously and you still get a 12-14% dividend yield at worst. The buyback is nicely accretive, adding almost 1% to BV for every 5% of its shares AGNC buys back at current levels. They can do most of that buyback just out of principal cash flows

    You may want to reconsider your decision. $20.20 for AGNC was likely a terrible sale price, but the HTS buy may be ok. I see a lot more upside for AGNC from here and probably better risk/reward.

    Sentiment: Strong Buy

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