Possibly picking Wamu
Bill Nygren of the infamous Oakmark Select has been repeatedly lambasted on the fundalarm board. He had as much as 15% of that fund invested in Wamu, and has repeatedly praised the company. Wamu has generated quite a bit of wealth for Oakmark shareholders in the past, but is now caught up in mortgage troubles. At one point, I followed Nygren's lead and picked Wamu, but ended my pick with a score of -15 points. Had I held on, I'd be even deeper into the red today.
But, Wamu is yielding over 8% today. This is not solely a mortgage play. I think less than 10% of its portfolio is in subprime mortgages right now; they have been divesting and tightening underwriting standards. They are a good retail bank, and they recently acquired a credit card issuer. Its balance sheet is also strong, which the board emphasized by recently raising the dividend even amidst the credit market turmoil.
Things do look bad right now, but I believe that Wamu will come out of this OK, and will likely even take market share from the other mortgage players who are now running away. Bankatlantic got itself screwed because they held risky loans and didn't reveal them; I think if Wamu was doing the same, it would have fessed up by now.
Of course, there is the risk that I will be early if I pick this stock right now...