I have been saying to readers that one of the stocks I am watching for a buy is Thornburg Mortgage (TMA). Kind of wish I had hit the button rather than watch.
On Tuesday, Thornburg reported net income before preferred stock dividends for the quarter ended December 31, 2007, of $64.8 million, or $0.33 per diluted common share and $0.34 per basic common share, as compared to $80.3 million, or $0.68 per basic and diluted common share, for the same period in the prior year.
Net loss before preferred stock dividends for the year ended December 31, 2007, was $874.9 million as compared to net income of $297.7 million for the year ended December 31, 2006. The company’s fourth quarter cash dividend for common shareholders of record on December 31, 2007 was $0.25 per share, which was paid on January 30, 2008.
Read the press release here:
Here is the only thing that matters. “Continued exceptional credit performance with 0.44% 60-plus day delinquencies and REO at December 31, 2007, well below the 4.23% industry average at September 30, 2007”. Larry Goldstone, president and chief executive officer said “..we have begun to see financing conditions improve and, despite these challenges, we successfully continue to maintain existing short-term financing facilities with our existing finance counterparties and have successfully added new financing capacity since year end.”
He continued, “With the potential for expanded agency guidelines raising the conforming loan limit, the company would expect to benefit from this market change as a notable percentage of its pipeline and existing unsecuritized loan portfolio would qualify under the increased loan limit. The company would then be able to create agency securities as well as the private label securities in order to further diversify its portfolio financing strategies.”
They have not been able to sell a CDO since October 2007 but are under the opinion they will in Q1, 2008. This is good for the entire market.
Despite what you may think, people are still buying houses. Just not at levels they were before. Thornburg is focused on the upper end of the market and while results prove it has slowed, it is not non-existent. For lenders like Thornburg, finding financing for their loans is key and with the industries lowest default rate, that potential issue ought to be put to bed.
As long as TMA is able to keep their default rate low, they will be fine. Based on past and current results, that should happen. When housing returns, they will emerge a very strong and more preferred player in the business.
The stock has rallied form $8 on 1/18 to almost $13 now. It is important to note these numbers are down from a high of $28 in 2007. The stock yields 7.8% and based on Q4 results, seems safe after being ditched in Q3.
Rush out and jump in? No. TMA has been volatile and the next market leg down ought to take TMA with it. Then it will give you a better entry point. You could sell the March $12.50 call and receive about $100 per contract. That would lower your entry price, should you get “put” them (forced to buy at $12.50) at $11.50. If TMA keeps climbing, you keep the cash and do it again.
I may do just that…
Disclosure (“none” means no position):None
