Arohan

Will BofA Really Buy Countrywide?

The deal looks bad if you cannot think beyond the present time. It would be a stretch to imagine that the mortgage market will remain in dumps forever. People will start buying houses. Do you think BAC should wait until the market comes back up, Countrywide gains marketshare and profitability, and then buy Countrywide for $50 a share? Why would Mr Lewis make such a boneheaded decision?

Yes, there are risks in this acquisition, but nothing that Bank of American can't fix by supporting this in the short run with additional capital. Once the market stabilizes, this should be a huge score for BAC. One forgets that Countrywide was (or maybe still is) simply the best mortgage company in the country. You also forget that BAC has been a growth oriented company and is now hitting a limiting factor in its growth (deposit accounts cap) and buying Countrywide is probably the best way for them to continue growth. Sure they can acquire internationally and they will probably do that but as a shareholder I sure as hell hope that they do not let this golden opportunity to get Countrywide for a pittance go by

You did the right thing by buying BAC stock, but for the wrong reasons

BofA/Countrywide Merger Arbitrage Opportunity

As if you read my mind! This trade has been discussed quite a few times in several blogs (links below) and I have to say that this offers a very interesting case study

www.arohanvalue.com/20.../
www.arohanvalue.com/20.../

And also,
tradinggoddess.blogspo...
www.princeofwallstreet.../

Financials: Insiders Buying on Consistent Basis

Thanks Todd for a good summary of how many value/vulture investors think that the financials are very good buys right now. I have been advocating my readers to start buying financials for some time on my site (www.arohanvalue.com) as this may be an opportunity that one finds very rarely for some outsized gains

Pundit Failure: We Are in a Bear Market and This Is a Recession

Good work. I have been insisting that the recession is here for quite some time now in my blog (www.arohanvalue.com). Needless to say it has generated quite a discussion

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BofA/Countrywide Risk Arbitrage Opportunity

Agreed that CFC is trading at a discount to its deal closing value even after adjusting for tvm and this is a very good strategy for above market returns in a short time frame with very little risk.

However, as a long term investor who views BAC as a great company to own for a long time and who also views BAC to be severely undervalued at this time, buying into Countrywide today actually gives a way of acquiring BAC stock at a discount to even the depressed stock price today. I am inclined to just buy CFC, let the deal close and convert to BAC stock and just let it ride

Another thing to consider. CFC has a larger dividend yield than BAC today (10.9% to 6.9%). Also the deal does not seem to have a provision to adjust the exchange ratio of shares if CFC pays out dividends in the interim. If CFC does not cut its dividend, it would appear to me that buying CFC today, and reinvesting its dividend would actually get you more BAC stock for your CFC shares at the deal closing than what was announced. Of course, this difference in dividend yields also helps in the risk arbitrage strategy you discuss as you get a net payment for 2-3 quarters in dividends just to maintain your position and do nothing.

I am surprised as you are that this kind of mispricing exists, but in todays volatile markets anything is possible

www.arohanvalue.com

Jim Cramer's Mad Money Lightning Round, 1/16/08: Countrywide Recession

Why would you sell Countrywide now? Does Cramer think that Countrywide will go bk before the acquisition by BAC closes?

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Jingle Mail, in Practice

Is this a real story? I have hard time believing that the bank would approve a new loan for $500K worth of real estate unless of course the individual in question can fully doc viability of 1300K worth of debt. In that case, if this person now decides to break the loan contract with Countrywide, it is very very difficult to fault Countrywide.

arohanvalue.blogspot.c...

Countrywide Financial Hasn't Failed - To Disappoint

Fears are overdone. Mozillo maybe too optimistic in some eyes but he is also an excellent operator. We will soon know if CFC's view of future profitability pans out in reality, but one thing is for sure, CFC is too big to fail.

I agree with the author that the stock is very close to the bottom, if not already there. Therefore, and knowing with great probability that CFC will not fail, this is a good time to go long. Actually, this may be the best time in decades to go long on many financial names

arohanvalue.blogspot.c...

Jim Cramer's Mad Money Lightning Round, 12/11/07: Good Greif!

Sorry Cramer, I am sticking with my buy call on CFC

arohanvalue.blogspot.c...

The Strategy of Capital Injection

Don't know if Ken Griffin has the appetite to run a company. Buying passive investment assets is different from running an actual company

arohanvalue.blogspot.c...

Countrywide's FHLB Bailout

The problem of course is if Countrywide fails, it does not automatically make all the loans (bad, marginal or otherwise) that it held on its books disappear like magic. No problem is solved by letting Countrywide fail

It is however quite possible that this particular event would be quite traumatic to the markets and the housing sector

It is in everyone's best interest to make sure that the company survives, is able to take its lumps, be wiser for it, and move on.

arohanvalue.blogspot.c...