Weighing Machine
Long/short equity

Is Altisource Residential A House Of Cards?

Shares of Altisource Residential (NYSE:RESI) have soared +89% this year as the company has rapidly grown it's portfolio of NPLs. RESI now trades at 1.5x book value - a 30-50% premium to it's peers. Growth has been facilitated by accommodating capital markets which have allowed RESI to sell equity at favorable prices. However, there are very good reasons to be cautious on RESI - particularly when insider interests are widely divergent from equity holders. While the company tells a good story, a careful reading of RESI's public filings reveal the following:

  1. RESI's accounting is aggressive in my view. The company's third quarter reported earnings come almost entirely from changes in Level 3 asset values. Changes in Level 3
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