Educated Investor

Comparative Price Shopping: Selected Banking, Mortgage and Brokerage Stocks

Dihard: Market Cap is not viable since so much cash walked away from E*Trade's business back in November. EPS and PE are negative. I can see why she went after price comparisons since E*Trade is being punished as a banking and mortgage type stock.

Comparative Price Shopping: Selected Banking, Mortgage and Brokerage Stocks

Hey jimmy46: Did you do a search for info about E*Trade's FICO? I just took a few minutes. In the E*Trade conference call they just stated "high FICO scores." But there is a December 2007 article entitled "Calculated Risk" that was published regarding E*Trades transaction with Citadel. In that article it says the average FICO score is 725 and the LTV 71%; so I guess Ms. Reed's statement is conservative. This December article was surprised that such a strong portfolio had to be liquidated at such a discount. Of course as Ms. Reed has pointed out the "run on the bank" mentality brought on by Bhatia nearly did cause bankruptcy.

Comparative Price Shopping: Selected Banking, Mortgage and Brokerage Stocks

With the global economy factors this looks more like a fluctuating bull/bear market, not a "BEAR RECESSION" market. That is why your bear market philosophy is not showing up in Q1 trading numbers. Also, with the negative subprime announcements in Q1 it should be the worst Quarter of 2008. Or Q1 and Q2 will be similar. At any rate "death to brokerages from the bear market effect" is just not matching what is happening out there. Also, the ETFC $1-$1.5 B of loan losses over two to three years is 5 month old news. The conference call was positive about the fact that in spite of conservative scrutiny of the loan portfolio and performance for Q1 the loan loss number did not need to be increased! Compare that to what other mortgage companies are having to announce! That announcement alone should bolster the ETFC share price upward.

By the way ... your contrary perspective is appreciated and is important to help us think through things.

Comparative Price Shopping: Selected Banking, Mortgage and Brokerage Stocks

One other thing, User 181148, if "all brokerages suffer" in a "recession" why was the first quarter trading of 2008 completely the opposite result (trading was up)? And SCHW just got an analyst upgrade? Although AMTD just got an analyst downgrade, because the S&P has the same opinion as the author, that ETFC's improvements will impair AMTDs position. I'm still waiting for your thoughts on the Washington Mutual and Countrywide stock prices.

Comparative Price Shopping: Selected Banking, Mortgage and Brokerage Stocks

She has a point that the company should have better stock price treatment that Washington Mutual and Countrywide Financial. Please comment on that User 181148

Comparative Price Shopping: Selected Banking, Mortgage and Brokerage Stocks

Hey User 181148, I think the $3 to $4 price is a punative price based on the issue of ETFC being on the verge of "bankruptcy." That is obviously not the case and that is what the author is focused on, that the company is not going bankrupt and an upward price adjustment would be in line with that change of status.