NewStar Financial, Inc. (NASDAQ:NEWS)

CAPS Rating: 1 out of 5

A commercial finance company, which provides customized debt financing solutions to middle-market businesses, mid-sized specialty finance companies, issuers of asset-backed, residential and commercial mortgage-backed securities and real estate borrowers.

Recs

2
Player Avatar JakilaTheHun (99.94) Submitted: 8/19/2009 12:50:45 PM : Outperform Start Price: $2.41 NEWS Score: +328.53

It's rarer than rare that I green thumb one of the day's biggest gainers. I prefer to shop from the other side of the wall (the day's biggest losers). However, this looks like a good bankruptcy risk play.

From a glance at NEWS's financials and a read-through of their most recent earnings calls, I believe this company has a good shot at survival. The market seems pretty scared that they will fail, however, hence the low price.

Tangible common equity is over $11 per share. As with almost all financial stocks, they have a great deal of leverage, but at 76% Liability/Value, they would appear less levered than many similar firms. Earnings have been slightly negative over the recent quarters, but operating cash flows have been slightly positive. Since "earnings" are almost totally dependent on the "provision for loan losses", I see it as a somewhat speculative measurement tool. Of course, that can cut both ways --- it could mean their losses are worser than reported or not-as-bad as reported. Either way, I believe their portfolio is good enough and their financials are strong enough to survive and the stock is probably worth more than $5 in that case.

Of course, this is a somewhat speculative green thumb and I mostly use it to test my ability to analyze the financial services industry, but I feel good enough about it so that I believe I had at least 60% odds of seeing large gains on it.

Member Avatar bucheron (63.50) Submitted: 12/17/2009 3:37:38 AM
Recs: 0

Will have a look, Commercial banking one of the few bargains left, bulk shipping and luxury are also in the same basket just gotta be careful with the ones heading for the bankruptcy.

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