CapitalSource, Inc. (CSE)

Real estate will be hit bad, but someone still has to carry the torch

Priced at about 1/2 of intrinsic value. Solid management team and move from REIT to traditional bank is a good long term decision.

screened - 5*

I like managments creative solutions at solving some of the problems they face. I also like the value proposition of the stock (i.e. undervalued) with a broadbased economic recovery stock should do well. My major concern is their exposure to commercial loans and how deep losses will be in the short term.

Tracking some of my real portfolio

Down in the dumps right now, but if it can withstand this it will be ok.

I am a little surprised there are still opportunities like this out there after the huge market run over the past few months. Looks like a winner to me...

yes

First you start with the 5 star rating - then you add a mangement team with vision. Sprinkle in timing and a stock that has been oversold. When th economy recovers, the legacy loan portfolio issues will continue to hold this stock back from its glory days, but that won't stop this stock from hitting $10 sometime in 2010.

This stock will trade within a narrow limit until it reports 4th quarter results. At that point it will head upward.

Stock is too small for Wall Street to notice.

Houses in bunches.

A while back, I took a look at CapitalSource (CSE) on my blog as part of a four part series. Part 1 can be found here:

http://www.poeticportfolios.com/?p=168

At the time, I was concerned about their debt refinancings. There are still risks based on covenants on their restructured debt, but barring a complete economic collapse from here it looks like they're going to be okay. The new CapitalSource Bank should be an earnings machine once the market improves. For now, I believe book value is a good proxy for the company's worth. The current book value is around $8 per share. After a beating over a news article yesterday, that's about a double from here.

Just yesterday FBR capital maintained their Outperform rating and gave a price target of $6. Stock price is 85% off the 2007 high. Price to Book 0.55.

I really try not to herd pick, but when I saw what Klarman had accumulated... I wanted in. Mainly because finance is the hardest industry for me to understand and identify a good pick. I assume that the guy working in the business would know better than I - and with so many to choose from, he has chosen this one.

Baupost

Don't be fooled by CAPS ratings. As shown by the chart, CSE has declined 70% while the S&P has declined 20%. This occurred even though CSE CAPS rating was 5 stars. It appears that the high ratings are trying to build up the price so current holders can then dump stock, or an attitude of "I own it so it must be good".

BEWARE OF CAPS RATINGS.

Risky but with great potential if managed correclty

S20>33,S50<67,S200>33,C>Mx3