The First Marblehead Corp (NYSE:FMD)

Directional bet on financials/loan industry. Company is trying to change business model. Priced for failure, but I believe in management

Near 52 week low. Will test this low and probably come close to 1.00 before bouncing if at all.

misunderstood company

An old favorite hidden gem that I bailed on in my personal portfolio a couple of years ago when it looked to me like securitizing student loans was gone for good and managment didn't seem to be considering any other options. I cleared it out of my CAPS portfolio a few months ago when I needed room for something new and was looking for dead wood to prune away. They have been developing some fee businesses lately including an acquisition but nothing that had me thinking they have a viable business model.

Last night's earnings announcement changed my mind enough to add them back in CAPS anyway. Forget the different statements that show nothing more than a non business slowly burning cash. The announcement that they will not be selling their tiny bank franchise (one branch I think) and will start originating student loans from the bank in 2012 has me interested in the FMD story again. I'm no financial expert however it would seem to me that the tiny size of their bank and stricter lending regulations would make it difficult for them to build a student loan focused lending operation up any time soon. However FMD fans will probably recall that Goldman Sach's invested several hundred million dollars in FMD in the early days of the financial crisis at prices of ~$12.00-$15.00/ share. There was speculation at the time that G.S. would assist FMD in becoming a spread lender and in fact offered a warehouse loan that seemed to fit that bill that FMD ultimately declined to accept. I'm thinking G.S. might be in the background looking to salvage their investment here and it's at least worth another CAPS thumbs up bet.

Big speculative play.

Can management find a new way to grow revenues? Looks like they have a solid chance with their new focus.

Turn around play. New business models defined and launched. Adequate cash on hand to survive. Can potentially (but still far from) stand on its own without capital market operations, and gravy if cap mkt does come back to life for private student loans. Most recent acquisition of TMS shows management's confidence in cash position and focus on growth.

good looking.

FMD

if cannot find a job, get a loan to study. Plain and simple

The was a MF Hidden Gem. I like to keep gems around to remind me ...

It seemed like a good idea at the time... sigh.

These guys need to find something else to do because their core business is as good as dead. Obama Admin's made its intentions clear that they're planning on eliminating the middleman when it comes to doling out student loans. FMD is the middleman.

this stock is in a perfect position to make me big money. Credit will start flowinng eventually, Obama is big on education and this stock is cheap. In time, this stock will make me some serious green.

This prie is too low to pass up. This stock will benefit when credit starts to flow again.

The officers have abandoned ship, the agreement with TERI went under, the market for loans is permanently impaired. This is just a shell now.

POSITIVES
1) Core franchise and know-how in long term business - student loans
2) Belief is that the student loan origination business is more important here that the loan pooling and securitization capabilities
3) Founder return
4) Large Goldman Sachs private equity funding in the middle of the crisis shows confidence

NEUTRAL
1) Company needs to change their financing model in the short-to-medium term since securitization is not currently available.

NEGATIVES
1) Very large risk is that Securitization market are closed for extended period of time and the company fails to find other ways to finance its student loan origination

Student loans

Playing a risk/reward ratio here on the likely probability that the credit markets will eventually stabilize.

Student loan demand increasing. Dan Meyers back at the helm. Will asset backed securities unfreeze soon?