-- Faisal Laljee
Full Disclosure: I do not have any position in RATE but my position might change anytime without notice.
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Bankrate looks like a cool short
Sunday, March 25, 2007
RATE has not pulled back much considering how mortgage companies have rolled over. A huge chunk of Bankrate's business comes from mortgage companies who were willing to pay up huge for online referrals. With so many of these guys struggling, RATE will lose much of its pricing power and this will hit their earnings in the current quarter. I recommend shorting RATE for the short term despite the possibility of rate cuts later this year.
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5 comments:
The typical RATE customer has a 700+ FICA score, well above the subprime 650 threshold. I disagree that they are heavily exposed. However, we may still have a near-term short if St sentiment thinks they are at risk.
It won't matter. With reduced competition, lenders are not willing to pay up for online advertising the way they did before and even though online consumers tend to be on the prime side, subprime companies do list with Bankrate and pay them referrals. Apparently, my call was right. In two days since the post, RATE has dropped over 12%.
You weren't right here (yet). Infact your thesis hasn't even played out. If I read your call correctly, your thesis was that this will "hit their earnings" when they report. The recent sell-off is far more related to COO/Sr VP G Cotter Cunningham (who had been w/ the co since 99 when the stock was sub $10) departing and the overall market weakness than your "call". I agree with you that RATE could face mortgage related pressure, but getting the reasons right is essential.
Hello,
Why weren't you short here if you were very sure (as you wrote here). It did drop 12% as you stated.
I did short it and covered for a quick 2% gain. I do think its a longer term short though. Also, I post about so many stocks that its impossible for me to actually own so many.
Thanks for the comment.
--Faisal Laljee
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