ABS Market Shows Signs of Life: Expecting Upside From FMD

Kaufman is out with a major call on First Marblehead (NYSE:FMD), MRU Holdings (UNCL) & SLM Corporation (SLM), saying that while the securitization market for most asset-backed securities has been dead for some time in response to credit concerns they believe it is beginning to open up a bit, as longer-term investors, including insurance companies and banks, search for longer duration, higher yields than those available in the Treasury markets. These higher yields, in turn, are attracting buyers back to this segment of the ABS market because it is longer duration paper at higher yields.

Notablecalls: FMD is still trading below the levels it reached following the FBR upgrade last week. The tone of Kaufman's call is surprisingly positive and I expect the stock to produce a nice upside move in the very near-term, possibly surpassing the $3.99 high from last week.

Actionable Call.

Comments

[BottomFisher:]

If this article is right and the market opens back up for FMD you're probably looking at $10/share once they announce any kind of a securitization. Even at this price the stock would still be incredibly cheap given that they earned over $4/share when the markets were health.

2008 Jun 03 03:37 PM