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(B)(N) AAMC Altisource Asset Management

November 1, 2013

Deal Book. Altisource Asset Management built a better mouse trap and its share price is up +3000% since December from $15 to $640 and off a little bit from highs of $730 this year. The company has a market value of $1.5 billion at these prices and a net worth of $3.5 million (at any price) as well as liabilities of $770 million because it’s in the business of helping Americans to recover the houses that they lost in the “asset bubble” of 2001 through 2007 (The Street, October 30, 2013, Bill Erbey Made $2.3B Off Your Underwater Mortgage).

Courtesy: Altisource Asset Management

Courtesy: Altisource Asset Management

Altisource is just one of a suite of companies with complementary skills that has been created by Mr. Bill Erbey and Ocwen Financial Corporation to return houses, sell houses and rent houses that would otherwise be vacant in the inventories of the America’s largest banks. Please see Exhibit 1 below.

It’s estimated that there is still about $1 trillion (10 million $100,000 loans) in delinquent mortgage loans and the largest banks are stepping away from that business which was dominated by the US Savings & Loan business in 80s and 90s, and now, once again, needs some new attention and it seems that Ocwen and its subsidiaries are on the leading edge of new models for the origination and servicing of home mortgages (ibid, The Street).

Exhibit 1: Ocwen Financial Corporation

Ocwen Financial Corporation

Ocwen Financial Corporation

Based on the numbers in Exhibit 1 above, investors are expecting great things of these companies nor are they alone as the stock prices of its competitors are also very active on thin evidence; NSM Nationstar Mortgage Holdings has doubled this year and WAC Walter Investment Management is up +30% from lows earlier this year but still down from $50 last year.

Although we can’t explain the prices, we can temper the vision with the price of risk which is a common denominator. Ocwen became eligible for inclusion in the Perpetual Bond™ at much lower prices of $20 last year and our estimate of the downside in the stock price due to the demonstrated volatility is minus ($7.50) per share so that it could be trading between the current price of $60 and $55 to $65 without surprise. On the other hand, the December put option at $55 is expensive at $2.40 per share but could be easily paid out of the current profits on the stock and guarantee our price at $55 until we have more information.

Exhibit 2: (B)(N) OCN Ocwen Financial Corporation – Risk Price Chart

(B)(N) ONC Ocwen Financial Corporation

(B)(N) ONC Ocwen Financial Corporation

Ocwen Financial Corporation is a financial services holding company. The Company through its subsidiaries provides residential and commercial mortgage loan servicing, special servicing and asset management services.

(Please Click on the Chart to make it larger if required.)

From the Company: Ocwen Financial Corporation, through its subsidiaries, engages in the servicing and origination of mortgage loans in the United States and internationally. The company’s Servicing segment provides residential and commercial mortgage loan servicing, special servicing, and asset management services to owners of mortgage loans and foreclosed real estate. This segment primarily offers services for subprime residential loans. Its Lending segment is involved in the origination, packaging, and sale of agency mortgage loans into the secondary market. Ocwen Financial Corporation was founded in 1988, has 7,600 employees and is headquartered in Atlanta, Georgia.

For more information on the Chart Elements, please see our recent Post, The RiskWerk Company Glossary.

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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