Time to Cover Countrywide
There is just so much beating a stock can take. Yes Countrywide (CFC) is a mess and has been for the last 12 months. The stock has lost most of its value and is down from $45 last February to less than $6 at one point today. The company’s market cap has shriveled down to a mere $3.5 billion and this is the largest mortgage company in the US. Their servicing portfolio alone is worth a lot more, but investors are not taking any chances.
Back in July, with the stock at $35, I recommended shorting the stock and at various points during the slide, I have shorted the stock and made money. Today, I recommend covering your short. Easy money has been made to the downside and while things are still very bad, this decline is somewhat overblown. If you shorted the stock then, you are up 82% on the stock. From this level, being on either side of the stock is very risky.
– Faisal Laljee
Full Disclosure: I covered my CFC short last week and currently have no position in CFC. However, my position can change anytime without notice.
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So what do you think about this rumor of BAC trying to buyout CFC?
Seems ridiculous to me. Why would BAC want to buy a failing business? Seems like somebody needed to get out.
I don’t think its a rumor. They are definitely talking. I wouldn’t call CFC a failing business. They are still the largest mortgage company in the US and their servicing portfolio alone is worth a lot more than the current valuation justifies.
This is one of the reasons that I mentioned the stock was so risky on either end. The day after my cover-your-short recommendation, the stock dived another 15% but was up 40% the very next day on talks of this BofA takeover. It could go either way.
WHAT DO YOU THING ABOUT ING. SHAREBUILDER INVESTING
I think its a great way to invest. I have used it myself in the past. It allows you to invest a certain # of dollars every week without paying too much fees. A word of advice though – make sure you don’t overdiversify. Lets say you buy 20 different stocks or ETFs and each has about $300 invested. When its time to sell, you will end up paying hefty fees to sell.
Good luck,
Faisal