A COMPANY I LIKE NOW
Usually we discuss companies on my watch list and I talk about my buy-around price.
This time it's different. I like this company at the current price, a lot. And I envisage holding it for years to come.
The company: First Marblehead (FMD).
It has every thing I want in an investment; increasing revenues -- from $301 million last year first quarter to $375 million -- high profit margins in an industry that continues to experience phenomenal growth: private student loans.
First Marblehead isn't a lender though. It designs, markets, and services loans on behalf of lenders and schools. It also slices those loans into asset classes based on risk ratings using its knowledge of the industry and a proprietary database, and sells the asset-backed securities into the secondary market. Last year, FMD facilitated $4.3 billion in student loans, a 28% increase over the previous year. It continues to generate revenues on the loans by helping the institutions manage the accounts: billing, collections, etc.
The company's stock price has been hammered due to the market's fear for its future. At the current price, if everything the market is afraid of happens, it's still undervalued in my opinion. The problem is that many of the institutions FMD sells asset-backed securities too are facing the current credit crisis.
But this crisis will pass and FMD's market is here to stay. People will continue to seek the benefits of higher education.
If you are ready to think long term beyond the noise of the current credit crises, this is a company that has huge cash on hand -- over $370 million on its balance sheet with very negligible debt. High margins, very high ROE, ROI, ROA.
I believe it is worth more than double the current $33.49/share it is selling for. That's a huge discount for a great company. It may be a volatile stock, but I also believe it's one you should have in your portfolio for the foreseeable future. Do your own research, read the annual report and see if it's something you want to own -- long term.
Usually we discuss companies on my watch list and I talk about my buy-around price.
This time it's different. I like this company at the current price, a lot. And I envisage holding it for years to come.
The company: First Marblehead (FMD).
It has every thing I want in an investment; increasing revenues -- from $301 million last year first quarter to $375 million -- high profit margins in an industry that continues to experience phenomenal growth: private student loans.
First Marblehead isn't a lender though. It designs, markets, and services loans on behalf of lenders and schools. It also slices those loans into asset classes based on risk ratings using its knowledge of the industry and a proprietary database, and sells the asset-backed securities into the secondary market. Last year, FMD facilitated $4.3 billion in student loans, a 28% increase over the previous year. It continues to generate revenues on the loans by helping the institutions manage the accounts: billing, collections, etc.
The company's stock price has been hammered due to the market's fear for its future. At the current price, if everything the market is afraid of happens, it's still undervalued in my opinion. The problem is that many of the institutions FMD sells asset-backed securities too are facing the current credit crisis.
But this crisis will pass and FMD's market is here to stay. People will continue to seek the benefits of higher education.
If you are ready to think long term beyond the noise of the current credit crises, this is a company that has huge cash on hand -- over $370 million on its balance sheet with very negligible debt. High margins, very high ROE, ROI, ROA.
I believe it is worth more than double the current $33.49/share it is selling for. That's a huge discount for a great company. It may be a volatile stock, but I also believe it's one you should have in your portfolio for the foreseeable future. Do your own research, read the annual report and see if it's something you want to own -- long term.
posted by Shegun at
4:55 PM
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