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  • Monitoring The Cheap Oil Services Company, Geospace Technologies [View article]
    HV, it is a value trap (potentially) in that they have been overearning, given the benefits of multi-year $170 million project (that provided them visibility / stability that never had before) and a handful of tiny companies buying $135 million plus of equipment from them (and don't appear to be in a position to spend that much going forward). Estimates appear to assume they fill these holes and then some. Mgt has been very optimistic that some large OBX orders are in the pipe, so maybe it happens. Good luck.
    Apr 9 11:23 AM | Likes Like |Link to Comment
  • Monitoring The Cheap Oil Services Company, Geospace Technologies [View article]
    Thanks for the article, but this GEOS has all the makings of a value trap. GEOS benefited from a flood of orders that appear to have slowed down dramatically. The bridge to 2015 estimates looks extremely difficult. They have beat estimates on Statoil and a bunch of microcap companies spending large capex $ on their GSX wireless system. TGE, DWSN, MIND, SAEX look pregrant after their big spend on GEOS equipment. GEOS' customers are struggling, and looks like it is starting to impact GEOS. They need large GSX and OBX orders to start flowing to have a shot at bridging estimates. Good luck.
    Apr 9 08:49 AM | Likes Like |Link to Comment
  • America's Car-Mart: 45% Upside Over 12-24 Months [View article]
    >40% frequency and 70% severity from last quarterly cc, although framed it as recovery rate I believe (so 30% recovery down from 32%).
    Mar 8 03:13 PM | Likes Like |Link to Comment
  • America's Car-Mart: 45% Upside Over 12-24 Months [View article]
    Thanks again for spending the time. Sorry to follow-up again.
    1) I think it would only be similar to DE or F if CRMT was a manufacturer. I think mortgage gain on sale is pretty shady too, but at least with mortgage gain on sale, a portion of that gain on sale is allocated to an asset with a relatively liquid market (the MSR). The company's disclosures does imply there is a large gain on sale component (FV the portfolio results in a $154mm estimated hit / $63mm net reserve). from q:
    "The Company estimated the fair value of its receivables at what a third party purchaser might be willing to pay. The Company has had discussions with third parties and has bought and sold portfolios, and had a third party appraisal in November 2012 that indicates a range of 35% to 40% discount to face would be a reasonable fair value in a negotiated third party transaction. The sale of finance receivables from Car-Mart of Arkansas to Colonial has been at a 37.5% discount; however, due to the increased credit losses the discount will be 38.5% effective February 1, 2014."
    2) Where do you get 35% gm and average mark-up of "$3,000"? I calculate ~42.5% gross margin on car sales and 49% overall. A quick glance at GPI, AN, PAG suggests a used car gross margins around 7.5%-8.5% vs 42.5% for CRMT.

    At $9,750 "retail price" w/ 6.6% down (at least the average in fiscal '13) = ~$9,100 financed. and they recognize $4,150 upfront at 42.5% and are currently running at 70% severity of loss (another indicator of the aggressive mark-up) and now "greater than 40%" frequency of loss. It sure seems like there is significant economics recognized upfront and the imbedded costs to finance a book w/ 40% freq and 70% severity is multiples of what you implied above.
    Mar 7 03:27 PM | Likes Like |Link to Comment
  • America's Car-Mart: 45% Upside Over 12-24 Months [View article]
    Thanks for the reply FT. I would also like to state that I like mgt, but think they are in a pickle and their aggressive response to the competitive environment still may bite them in the arse further (in the form of significantly worse credit performance). One thing has always bothered me though: they often bring up their fixed interest rate (as a reason they might avoid regulatory or CFPB scrutiny). As stated above, the monthly payment is likely the #1 driver of a sale. The sticker price of the vehicle is often an afterthought. they sell an old car w/ 100k miles for "$10k" that cost them $6k wholesale. There would likely never be a cash buyer at $10k w/ that massive mark-up. The mark-up inbeds a dramatically higher financing costs relative to the 15% stated interest rate. Bc they recognize 100% of that gross margin day one, ever though they may only collect $600-$1k down, all the economics are front loaded. it is basically GAIN ON SALE accounting. The accounting works as long as credit is ok. It could unravel (further at least) if the more aggressive term, downpay and mods continues to result in deteriorating credit.
    Mar 6 09:51 AM | Likes Like |Link to Comment
  • America's Car-Mart: 45% Upside Over 12-24 Months [View article]
    Thanks for the article and 909's thoughtful response. not sure why you think you risk only a "20% draw-down." The aggressive competition likely ends as a result of some dramatic change in financing market or more likely, elevated credit losses. CRMT's response to competition has been more aggressive underwriting: extension of term and lower down payments. We are very still early in the more aggressive credits flowing through peak charge off periods. If credit frequency increases across subprime it would likely drive severity higher also (for everyone). That could be very painful for CRMT's results and stock price. good luck.
    Mar 5 09:11 AM | Likes Like |Link to Comment
  • Buying Opportunity In Walter Investment Management: Sooner Or Later The Limbo Will Stop [View article]
    Basel III capital requirements has induced only a few banks to sell MRS (Flagstar and Wells come to mind). The high cost to service is the more likely reason. However, WAC appears to still be a high cost servicer.
    WAC's leverage would make Lehman and Bear blush. They have issued $350 million of equity over since they de-REITed and have grown from a $1-$2B balance sheet to a $17B balance sheet. and it appears most of the gains in book value have been driven off paper mark-ups of their highly delinquent MSR portfolio. it's just my humble opinion, but WAC appears to be, by a wide margin, the riskiest of the three non-bank servicers (due to cf profile, leverage, and high cost to service, plus a highly questionable definition of operating earnings).
    Feb 20 11:32 PM | 1 Like Like |Link to Comment
  • Buying Opportunity In Walter Investment Management: Sooner Or Later The Limbo Will Stop [View article]
    Did some work also. Their "adjustments" to their earnings look highly suspect (just a word of caution when looking at the Adjusted EBITDA or earnings). Also, their cash flow statement is worth digging into, bc there are some red flags. CFO through 9M is negative $2B (mortgage biz which is capital intensive). The previous 12m they issued >$5B debt (although a lot mb and repo) and only $276mm of equity issuance. This is worth paying attention to as capital requirements for servicers has been mentioned a lot recently (equity ex MSR and MSR mark-ups), and WAC's is very low if not negative. good luck
    Feb 19 02:43 PM | 1 Like Like |Link to Comment
  • Harbinger Group's Sum-of-Parts Does Not Add Up [View article]
    Y, that valuation relative to AEL in November 2012 was asbsurd. The clear mistake was not buying AEL. It is up 125% since.
    Dec 16 05:19 PM | Likes Like |Link to Comment
  • Access National Is Still A Buy [View article]
    UncleLongHair, that statement in incorrect. Gain on sale margins of agency mortgages are on function of the mortgage rate, the par yield of agency MBS (aka the primary / secondary spread), guarantee fees and expected duration. the primary secondary spread widened to all time highs in the 2H'12 as QE artificially depressed MBS yields. That has begun to reverse
    Aug 14 03:32 PM | Likes Like |Link to Comment
  • Access National Is Still A Buy [View article]
    UncleLongHair, thanks from the background but not sure what your opinion is. Originating and selling conforming mortgages has indeed been a very profitable business for ANCX, but that business has been "over earning" because of historically wide spreads and very high volumes. That favorable backdrop changed dramatically in June w risking mortgage rates. Volumes are likely decline and margins have normalized, which will likely create pressure on ANCX's earnings. It seems like that "secret sauce" could cause some pain as conditions normalize.
    Aug 9 01:00 PM | Likes Like |Link to Comment
  • Access National Is Still A Buy [View article]
    I appreciate your thoughts and quick response. If commissions are 95bp then non-commission salary expense at the mortgage bank is still about the same size as the salary expense at the bank. Since commissions are usually the highest expense for a mortgage operation, this does strike me as a bit strange. I don't believe the 10q is out, but I believe non-comp / ex-provision expense is running ~$1.6-$1.7 million a quarter at the commercial bank segment. For a growing commercial bank w/ >$800 million of segment assets and a wealth mgt division, this sure seems absurdly low. Again, this is just another red flag that something might be up with the allocation of expenses between mortgage and banking (and thus the pain of lower mortgage results could be more severe than expected).
    Aug 7 12:01 PM | Likes Like |Link to Comment
  • Access National Is Still A Buy [View article]
    Thanks for the article, but you did not address the elephant in the room. Gain on sale of mortgages was still $7.1 million in 2Q after Denver with total pretax of $5.5 million, so >than 100%. We are just coming out of a mortgage banking volume and gain on sale margin bubble. I have trouble understanding how stock works if mortgage drives earnings lower. Also, I also have trouble reconciling the company's segment disclosures. They appear to allocate very little expense and salary to the commercial bank relative to the mortgage banking segment (potentially overstating the high multiple biz relative to the low to mid single digit multiple biz). It appears somewhat questionable. Would love your thoughts. Thanks
    Aug 7 08:58 AM | Likes Like |Link to Comment
  • Impac Mortgage, A Hidden Value? [View article]
    On 5/9/13 conference call they said they had a $800 million pipeline, April was their biggest origination month in years, and guided to greater than $4 billion of originations in 2013. That guidance implied $1.1 billion per quarter. I just read the transcript of the webcast, and looks like 2Q volumes came in below $800 million and they are cutting expenses and laying off people because volumes were so low the past month. Again, not sure where there is value here. Looks like a big value trap. Good luck David
    Jul 23 03:46 PM | Likes Like |Link to Comment
  • Impac Mortgage, A Hidden Value? [View article]
    And to throw my two cents in, I see little value in the common shares. They don't have much of the business with my estimate of zero residual value in their securitization (the Long-term Mortgage Portfolio segment), the Real Estate services segment is a melting ice cube (nearly all driven from the shrinking LT mortgage portfolio, which one could argue is someone questionable), and the origination gain on sale business could not make much money despite a historic bubble in gain on sale margins. that bubble has now popped. This reminds me of SNFCA, which I described as a value trap at $8 here on seeking alpha a few months ago (it is now down 25-30%)
    Jul 23 02:45 PM | Likes Like |Link to Comment