Replies to post #7179 on Value Microcaps Zip Code Changers

[bbotcs]

resesarcher59: ATPG

So now we know. Can they get financing without giving away the company. Glad I threw in the towel at $5 or $6. I wish they could sue BP for their losses. The Gulf oil spill was their downfall. A really good team of lawyers should be able to make a case.

[2morrowsGains]

ATPG...Could get an update as early as this week. The S&P downgrade caused the stock to hit an all time low ($1.10), but it's been recovering since. Time will tell if this was a good buying opportunity. Still think ATPG can pull this off. CEO owns 6M shares so he definitely has interest to keep her afloat.

[littlefish]

researcher59-

ever considered looking at FNMA and FMCC? I bought starter in FMCC today and added to an existing small FNMA position as it dipped under $0.3.

Tons of debt of course with preferred shares owed to treasury ($117 billion for FNMA alone). But they have serviced those payments last 2 Qs and have increasing earnings, loan quality strength, lower chargeoffs, lower loss reserves, lots of trends in their favor even though Q2 is seasonally strong.

Annualized PE if you took Q2 reuslts would have both companies under .25 PE. Also, that is after the preferred payments and includes credit derivative losses. Still fairly risky with the leverage and FNMA and FMCC well known as the cesspool/garbage dump for banks to hand over bad loans to but with housing market certainly seeming like it has turned I think it's worth a glance.

BTW, both qualify for Motherboard now :-)

Also been nibbling on SFD when dips under $18. More of a value long term play with some insider buying recently.

[littlefish]

FNMA (Federal National Mortgage Assoc) potential zip code changer along with Freddie Mac.

Reported over $5 billion income for Q2 and over $7.5 billion thru 6 months before dividends. After dividends they still pulled in over $2 billion thru 6 months.

Total market cap is less than the 6 months earnings (i.e. PE less than .5 based on 6 months #s annualized and less than .25 PE based on Q2 #s annualized).

Company is highly leveraged so going to have wild swings based on overall housing market IMO. BUT their loan portfolio is looking much better now.

Serious delinquent loans down to almost 3.5% of port with nine straight quarters of sequential declines.


Here's a little blurb explaining how strong the earnings were:

http://live.wsj.com/video/do-fannie-and-freddie-profits/1938764D-0E20-4E76-BC99-814AD8742513.html?mod=wsj_blog_tboleft

Oh ya and tangible book value I have at around 47 cents per share.

Remember they just reported a 37 cents EPS quarter and that was after paying back the dividend payment and with a $2.4 billion loss on derivatives (mostly tied to protection from higher interest rates so as rates rise I would think the derivatives could register gains).

Granted there's the $117 billion in preferred share debt to ge tout from under but they have $80 billion in cash/restricted cash and loss reserves over $60 billion. The loss reserves will stay elevated obviously but there's a fair amount of room for it to come down more if the housing recovery continues.

The FNMA preferred series S shares took off on today's earnings but the stock has not (yet).

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=fnmas&insttype=&freq=1&show=&time=7

Certainly a complicated company on top of the conservatorship but I can't ignore the earnings power here when you consider the very obvious positive trends they've had in their loan protfolio going back several quarters.

Off Q2 37 cents EPS annualized you have $1.48 in EPS so a PE under .25 currently, almost .2 actually (so a quadruple in share price would still have it a PE below 1 and a quintuple with a fwd PE a bit over 1 based on just Q2 #s annualized).

If you annualize the first 6 months 2012 of $0.35 EPS per share, the PE is still under .5 so a double in stock price would put the company trading at a PE under 1.

Not a great idea to annualize the first 6 months given the CEO commentary back half may not be as strong, but they are starting to build a bit of cushion for longer term IMO with the improved loans on the books (LTV was something like almost 70% for Q2! That's a big downside safety net IMO).
Nobody on Value Motherboard talking about it. Obviously warts with the massive $2.9 billion per Q payments due on the preferreds but look at the potential earnings power given a continued housing recovery and much b etter loan quality lately! This could be the beginning of stabilization for FNMA and FMCC.

The preferred holders seem to be grasping this.

There's a fair amount of shorted shares as well (FMCC has larger portion relative to days to cover but both have fairly large short positions to get squeezed if they pop).

I'm not risking a bunch of money on them but seems like they may be in for a prolonged sweetspot place if housing continues to recover.

All IMO.