So here we are again finding a great bargain. First Marblehead (FMD) provides outsourcing of private student loans. This stock was a success trading at over $40 a share before the credit crisis and the subsequent collapse of financial stocks. It bottomed at a little over $1 in July of 2008, and after announcing an equity investment by Goldman Sachs (GS) Capital Partners and the return of company co-founder Dan Meyers, the stock skyrocketed to $5, before settling down, and now trades around $4.
I believe that with the eminent reversal of the credit scare in the next couple of years, the expected rise in student enrollment due to a weakening economy, the financial relationship with Goldman Sachs, and the return of the founder, along with his compensation of only $1 annual salary with the potential of a larger salary only after taking the company back into profitability, First Marblehead may reclaim its dominance in private student loan outsourcing.
I am watching the expected conference call that the company previously announced would take place in September. What Mr. Meyers says or doesn't say during that call may determine the short term return on this stock. It could easily double or drop by half right after the conference call. However, longterm this stock may regain some of its luster, and could potentially hit double figures by the start of the Fall 2009 school session.
FMD made our Stock Picks Portfolio at $3.90 yesterday, and will be tracked. Ideally, I would like to hold on to it until 2010, but if a sudden large spike in the price takes place, I am more than happy to secure a quick profit if large enough.
Disclosure: Author holds a long position in FMD