The First Marblehead Corp (FMD)

muji (53.62) Submitted: 2/23/07 7:10 PM : Start Price: $44.33 FMD Score: -55.54

*Today's price is 45.39 with P/E at 12.25. It is the exact same value (P/E based) as when Hidden Gems selected it.
*Stock has fallen back to 44-46 support level it was in back in October 2006.
*Today's price based on absolute lowest P/E of 9.03 is 33.45.
*Today's price based on lowest P/E in past 6mo of 10.93 is 40.84.
*I don't believe price will get below 40.84 unless something drastic occurs.

Notes:
*Company has exceeded Tom Brown's (Bankstocks.com) and Hidden Gems' expectations over the past year.
*Both feel that Wall Street cannot price company properly and doesn't understand ramifications of new events properly.
*FMD has a heavily concentrated customer base with 3 primary customers being 60% of business.
*CEO scandal back in Sept 05 took the stock to low of 15.
*Rumors seem to crop up every earning period that a major customer will be departing or taking student loan operations inhouse.
*New CEO has focused on expanding customer base.
*Added 19 new lending partners since he joined thru 2006.
*One new large customer, KeyCorp, had previously gone it alone.
*New customer take 4-6 months to get fully active.
*Existing biggest customers continue to renew contracts.
*Securitizations hit parity in 3-7 years. This assures incoming future revenues in the fees starting 2008 and beyond.
*Number of private student loans are continuing to grow, forecast at 20% for several years.
*80% of FMD customers already use federal loans.
*President Bush proposed cutting federal loan amounts. This could indirectly steer more students to private loans.
*9% of consumers even know about private student loans. (02/2006)
*Default and pre-payment rates in loans are keeping steady over time, below FMD forecasts.
*Margin on securitization fees keep rising.
*BofA contract until Nov 2008, JPMorgan for 5 more years.

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