The First Marblehead Corp (NYSE:FMD)

You've got to be kidding me. Even if a few student's default on their loans (or let's even say a lot do) it's not like they're subprimes or something. Granted, in a recession it might be hard for some students to get jobs, but FMD's hardly going bankrupt.

Good growth of business in revenue/earnings or otherwise (do we think people are going to stop getting degrees?). No long term debt. Dirt cheap. I might take it in the shorts for this, but long term outperform.

Will weather the credit storm, solid business company, solid business model

Higher education is expensive. FMD is likely to securitize more loans and keep the money rolling in once the credit crunch is over.

I am sometimes guilty of riding the wave of consensus.

Fine company who has been penalized by the sub-prime mess.
Sound fundamentals, a super strategy, and with Sallie Mae getting tighter, will be bigger than ever.
It may take 18 months or more of pain, but this company will be a 3 -5 bagger in 5 year's time.

I think this stock is a steal. It is being priced at doomsday prices like they are going out of business. These are student loans, not home loans.

Doubled down here - cost basis now ~ $16

At a PE of 3.8 it looks like a buy to me. This is one you should hold your nose and buy. It stinks now, but they will come back.

VALUE LINES - WORST PERFORMING STOCKS 13 WEEKS

FMD has been a very well run company showing sustained growth primarily in the Student Loan area. Recently it ran into a couple of challenges and the stock price fell sharply. In my opinion, the market has over-reacted. I believe this stock will recover in 2008 and if past growth trends continue, this stock will be a mult-bagger over the next five years.

HG BOMB - Bankrupt in 10 years?

There are real concerns now about ratings agencies, FMD's prior lending agreements (did they get greedy), and will they ever be able to securitize again. In 2-3 years, we might all go away thinking "wow. they sure were cheap then".

Current fear and uncertainty surrounding the entire ABS market and all things securitization related, have created the opportunity to purchase a company with a strong competitive position and strong industry growth at an incredibly attractive valuation.

NPV of FMD cash flow is $60!

Assuming

1 - 12% discount rate
2 - Cash eps $2.35 in '08 and $3.00 in '09
3 - 15% volume growth per year (currently running at 35%)
4 - Upfront margins shrink 50 bps per yer

The Bear Case Doesn't Hold Up

1 - Partners will bring the business in house
2 - Partners will extract better economics driving margins down
3 - Credit is worse than expected; guarantor will require more collateral

Reasons to own FMD

1 - Strong secular growth prospects
2 - Company has important competitive advantages
3 - Attractive cash flow aspects to business model
4 - Business valuation is significantly above market value (young misunderstood compnay, large portion of company revenue non-cash, p/e of 4; peg 0.2

"Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."
- Warren Buffet

Severely beaten down by credit market seizures. I believe student loan securitizations will become possible again, though not as profitably as before. The company will also look for other ways to transfer student loans away from bank balance sheets. The demand for private education loans is only going to continue to grow, probably more rapidly now that mortgages are harder to get.

This stock will stabilize over the course of the next month and recover to the ~$20-$25 range over the course of the next three. Aside from the strong management team, this stock has a proven model, history, and is the leader in its market. Student loan securitization will prove to be a good business to be in over the next several years as those seeking safety find fewer and fewer options that maintain a decent return.

While past performance is no indication of future results, when you look at the charts, you'll notice FMD has never stayed beneath $20 for more than the absolute briefest instants over the course of its entire history.

While I expect more near-term volatility related to concerns about the marketability of asset-backed securities, this stock will likly survive, recover and, in the longest term, surpass previous highs.

Strongest buy under $18.

This is seriously undervalued. The price drop is more than is justified.

Totally oversold

P/E is currently 4.69. If it can stave off bankruptcy (which it probably can) it's a multi bagger over the coming yeras.

Student loans, not subprime mess. oversold, analysts are wrong.