Matt Ganucheau

8 Comments

    • ON: Wed Mar 26th 15:02 PM
      Commented on:
      Investment Bank Regulation: Beware the Dawn of This New Era
      Do you know of any publicly traded companies that will directly benefit from the coming increased regulation of the investment banks? That is what I would like to know. Thanks for the good piece.
      View article »
    • ON: Tue Mar 18th 14:45 PM
      Commented on:
      LandAmerica Financial Group Will Recover on Top
      the 30 year conventional mortgage rate has dipped below 6% for the first time since 2005.

      Research from Bear Stearns indicates that the average conventional borrower is paying a coupon of 6.14%, and actual mortgage rates are 5.90%, making 37% of the mortgage universe within the minimum 40 basis point refinancing window, and if mortgage rates decline another 25 basis points to 5.65%, that exposure increases to 50% of the market or $2.47 trillion in conforming mortgages. A 50 basis point decline would take mortgage rates to a record low of 5.4%, increasing exposure to 72%, of $3.53 trillion in mortgages.

      It is my belief that a major mortgage refinancing wave will be coming, and whenever someone refinances their mortgage they will need to buy title insurance. LFG will directly benefit from these refi's.

      View article »
    • ON: Tue Feb 26th 10:41 AM
      Commented on:
      LandAmerica Financial Group Will Recover on Top
      Thank you for your comments. I appreciate all responses.


      User 155569 said- “Assigning an EBIT margin of 10% is amusing.”

      LFG’s EBIT margins 2002-2006:

      2002 2003 2004 2005 2006
      9.6% 9.8% 8.5% 7.7% 5.1%

      LFG has earned EBIT margins near 10% in the past, and they should be able to earn higher EBIT margins when the mortgage market recovers due to their reduced expense base coupled with a more normal level of mortgage originations. A 10% EBIT margin expectation is a long-term expectation and is not unreasonable given what the company has earned in the past. Even if margins only return to 6%, you get a $60 stock, so I don’t see how you get hurt long-term. Moreover, FNF, a large competitor, says that they can earn 15% EBIT margins in a $2.4 trillion mortgage market, which I believe to be a normal market. LFG should be able to earn 10% EBIT margins in that environment, especially if management is able to implement some of its long-term initiatives to improve margins once the mortgage market recovers. Also realize that history has acquisitions that were not fully consolidated.


      User 155569 said- “2006 was their best year ever.”

      LFG’s EPS from 2002-2006:

      2002 2003 2004 2005 2006
      $8.06 $10.33 $8.02 $9.31 $5.68

      Looking at LFG’s earnings per share from 2002 to 2006, it is evident that this company does have to potential to produce earnings at levels way above what they are currently producing. A simple average produces an earnings number of $8.28, and with the stock currently at $38.41, LFG is selling for 4.6x the average of what they earned from the 2002 to 2006 period.


      User 155569 said- “Revenues will not improve from current levels for 4 or 5 years.”

      If it does take four or five years, and earnings return to $10+, you could have a stock that is selling for $100+ that is giving you a 3.2% dividend yield on your cost basis. With LandAmerica’s large dividend yield, you are afforded the luxury of being paid to wait. Also, this was meant to be a long-term investment idea.


      User 155569 said- “I would be very surprised if they don’t start writing off goodwill soon.”

      On goodwill, yes there could be write downs but it is very unlikely that they will write it all off (will the banks write off all their goodwill through this cycle? I doubt it).


      Near-term, the stock could be weak as incurred losses increase to build reserves, and the closing rate will probably be weak on this refi boom for a number of reasons. I just think this thing could be north of $100 in 4 years, which is a return that I would like to have. I would look to initiate positions in the low $30's and below.
      View article »
    • ON: Thu Jan 31st 16:36 PM
      Commented on:
      Amazon Shares Showing Resilience as Analysts Defend Stock
      I would think that people shop Amazon when their prices are lower, and that the company has no pricing power. I don't believe that they can both achieve their projected revenue growth and improve margins. The stock is extremely expensive, and I think that this bubble too will burst.
      View article »
    • ON: Tue Dec 18th 16:57 PM
      Commented on:
      Jarden Remains a Compelling Short
      Amit,

      Thanks for sharing your thoughts about JAH. I find your articles to be very easy to read and well thought out. Thanks again for sharing your analysis.

      View article »
    • ON: Thu Nov 8th 16:29 PM
      Commented on:
      Crocs Stopped Dead In Its Tracks; Can They Step It Up From Here?
      How can the analysts that cover the company and the market disagree so much?
      View article »
    • ON: Wed Nov 7th 21:01 PM
      Commented on:
      Three Reasons Why I'm Going Short and Buying Puts
      Thanks for the links to the articles. They were great reads. Just one question about the second one though, why is November 15th important with regard to the SFAS157 regulation? I thought the disclosure of level 3 assets was required by the end of the first quarter of 2008. Thanks.

      The Bear's Lair- Level 3 Decimation
      "From November 15, we will have a new tool for figuring out how much toxic waste is in investment banks’ balance sheets. The new accounting rule SFAS157 requires banks to divide their tradeable assets into three “levels” according to how easy it is to get a market price for them. Level 1 assets have quoted prices in active markets. At the other extreme Level 3 assets have only unobservable inputs to measure value and are thus valued by reference to the banks’ own models."
      View article »
    • ON: Wed Nov 7th 21:01 PM
      Commented on:
      Three Reasons Why I'm Going Short and Buying Puts
      Thanks for the links to the articles. They were great reads. Just one question about the second one though, why is November 15th important with regard to the SFAS157 regulation? I thought the disclosure of level 3 assets was required by the end of the first quarter of 2008. Thanks.

      The Bear's Lair- Level 3 Decimation
      "From November 15, we will have a new tool for figuring out how much toxic waste is in investment banks’ balance sheets. The new accounting rule SFAS157 requires banks to divide their tradeable assets into three “levels” according to how easy it is to get a market price for them. Level 1 assets have quoted prices in active markets. At the other extreme Level 3 assets have only unobservable inputs to measure value and are thus valued by reference to the banks’ own models."
      View article »
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