This is a follow-up to my previous post. I suspect that the EPS decrease from Altisource shutting down its lender placed insurance brokerage business is largely not recurring and is more like a one-time charge. If the EPS hit is one-time, it would mean that Altisource’s franchise is largely unaffected.
Today, Altisource stated that it is discontinuing its lender placed insurance brokerage business (press release).
The discontinuation of this business line is expected to reduce Altisource’s quarterly diluted earnings per share by an average of approximately $0.50 – $0.65 for the period October 1, 2014 through December 31, 2015.
My guess is that Altisource was involved in taking kickbacks for force-placed insurance. It is Ocwen that should decide whether or not to take kickbacks and it is Ocwen that would get to keep such kickbacks. However, it could be the case that Ocwen took its kickbacks as a lump sum fee when it sold Beltline Road Insurance to Altisource. See this Associated Press article which explains how it works. The article quotes a source that argues that what Ocwen/Altisource are doing is wrong.
Currently, Erbey wants Altisource to get out of (kickbacks on) force-placed insurance due to “uncertainties with industry-wide litigation and the regulatory environment”.
There are parts of the cable industry where scale is a massive advantage.
While Liberty Global largely owns cable systems (with a mishmash of other assets from its various acquisitions), it is also looking to use its subscriber base to get into the content game.
Benjamin Lawsky has gone after Ocwen looking for wrongdoing. So far it seems that he has found very little. Here are some of the claims that he has made:
AAMC is the asset manager that controls the operations of RESI. Asset management is a business with potentially wonderful economics because the returns on capital can be absurdly high.
Suppose that AAMC generates returns on equity of 16%. After taking its fees, the owners of the ‘closed-end fund’ (RESI shareholders) would receive a 10% dividend yield on their REIT. In the current environment of low interest rates and yield hungry investors, it is likely that such a REIT will trade at a premium to book value. AAMC can then sell shares in secondary offerings to further grow their assets under management. High management fees combined with a rapidly growing AUM base can translate into very high returns for AAMC shareholders. The economics are somewhat similar to midstream GPs such as Kinder Morgan.
*Disclosure: No position.
The market cap is around $1.49B. The shares are quite illiquid.
This is a speculation on my part, but I think that Q3 and/or Q4 will be good quarters for Ruger.
While I don’t like short-term trades, this may be a compelling short-term trade because the next two quarterly earnings releases may serve as a catalyst. The April 2015 call options may be a way to play this because the implied volatility is very low (below 30). There are a few long-shot scenarios that could cause the options to go up several times in value. If Ruger demonstrates earnings growth, the stock’s multiple could go from 9.5 to a growth stock multiple like 15-20+. Or, there could be a short squeeze because the short interest in Ruger is extremely high (those who own call options could randomly get lucky).
*Disclosure: No position in ARO. I’m not interested in buying at current levels. This post may be a waste of your time.
After Julian Geiger left Aeropostale, his successor (Thomas Johnson) has managed to run the retailer into the ground. On August 18, Aeropostale announced that Geiger is returning. During Geiger’s previous reign, Aeropostale’s revenues went from $123.8M in 1997 to $1,886M in 2009.
Suppose that Geiger returns Aeropostale to its former glory several years from now. Geiger’s last full fiscal year at the company was 2009 (Geiger officially left in Jan 2010). In that fiscal year, Aeropostale posted GAAP net income for $149M. Suppose that Aeropostale makes $149M, achieves a P/E multiple of 15, and has 82M shares outstanding. The share price would be $27, roughly seven times the current share price of $3.87. Of course, there are risks and other possible outcomes. It is likely that Aeropostale will face the same secular headwinds affecting its peers ANF and AEO. The profitability of all three ‘teen titans’ may be significantly lower several years from now.
