Hate to be A Pumper but ....

[adios]

You all might want to check out Novastar Financial, NFI, tonight. They went out at $31 a share today and after the bell they announced earnings and upped earnings projections for next year to between $7 and $8 a share. They're another mortgage REIT so they pay out all the earnings. They also announced a special divi from excess earnings not paid out from 2002. I am already long a pretty decent chunck of my portfolio so I don't know if I want to buy more or not. It will be hard to pass up less than $40 so I'll probably add on some tomorrow.

[scalf]

/forums/images/icons/grin.gif tom., thanks for info...i'll do my own dd, but looks gr8 right now...gl /forums/images/icons/cool.gif /forums/images/icons/heart.gif /forums/images/icons/spade.gif

[GeorgeF]

Novastar is getting alot of bad press from Herb Greenberg of realmoney.com. They evidently are doing alot of subprime lending. I suggest you do alot of dd before you invest. You should probably get a trial membership to realmoney and realmoney pro since they are discussing it there. There is no reason to believe that a subprime mortgage REIT will do better than a similar bank.

[adios]

Thanks for the warning. Actually several people I know are fairly certain that Herbie's stories are meant to help David Rocker who reportedly has a big short position in NFI. Rocker owns 10% of the thestreet.com. Other stocks that Rocker is short have been bad mouthed by Herbie as well. I've done my dd on NFI and Herbie has IMO misrepresented the business model at best and at worst has out right lied about the company.

[GeorgeF]

1) I could not find "david Rocker" in any SEC documents.
2) If you want to see Greenbergs criticism they are on the realmoney.com site. In out line form they are:
-Increasingly limited access to insurance
-Not just hedging, but speculation
-Lack of a chief financial officer
-Aggressive accounting
-No retained earnings

[adios]

Here is a link to a page where you can find a biographical sketch of Rocker. Look at contributers:

http://www.thestreet.com/tsc/about/whoswho.html

Here are a couple of links refuting Herbie's most recent column as it is a 2 part rebuttal:

http://messages.yahoo.com/bbs?.mm=FN&action=m&board=8729314&tid=nfi&sid=8729 314&mid=9805

http://messages.yahoo.com/bbs?.mm=FN&action=m&board=8729314&tid=nfi&sid=8729 314&mid=9806

A couple things to note about bond_dadddy's reply. The PMI refers to the insurance on Novastar loans. Also I can tell you that bond_dadddy is spot on about the accounting for the potential losses in the portfolio. It would be misleading to have too big of an allowance for credit losses just as it is misleading to have one that is too small. I'm sure you know that this item is an estimate for the current fiscal year that is taken as a charge on the income statement. It's an estimate that is accordance with the matching principle in accounting i.e. matching expenses with corresponding revenue. You can't really know for certain the extent of your non paying receivable accounts until they happen so when they do happen it is long after the revenue for those receivables has been recognized. Thus the estimate of the non paying receivables when the revenue is recognized for them. The retained earnings arguement is a red herring. REITs by law have to pay out at least 90% of their net income as dividends in order to maintain REIT status. By definition then REITS will not have retained earnings as they typically pay out 100% of the earnings as dividends. REITs raise capital via secondary offerings. As to non-conforming borrowers and the loan characteristics the best source of info are the 10-Q's and 10-K's for Novastar. Note in particular the loan-to-value ratios.

[adios]

Rodney Schwatken, 38
VP, CAO, Treasurer, Sec., Controller

I haven't done it but several have called Scott Hartman the CEO personally and asked him questions about the company and the business model.