NewStar Financial, Inc. (NASDAQ:NEWS)

CAPS Rating: No stars

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.

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Member Avatar rivera007 (< 20) Submitted: 1/14/2014 10:19:36 PM : Underperform Start Price: $15.56 NEWS Score: +50.25



Member Avatar JakilaTheHun (99.91) Submitted: 8/19/2009 12:50:45 PM : Outperform Start Price: $2.41 NEWS Score: +191.91

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 NetscribeFinancl (< 20) Submitted: 3/12/2007 7:51:48 AM : Outperform Start Price: $17.52 NEWS Score: -101.06

NewStar Financial is a commercial finance company that provides customized debt financing solutions to middle-market businesses, mid-sized specialty finance companies, issuers of asset-backed and commercial mortgage-backed securities, and commercial real estate borrowers.

Majority of the loan portfolio comprises of corporate loan accounting for 73%. Structured products category comes next with 15% that makes investments in asset-backed securities and mortgage backed securities including some sub-prime residential mortgage exposure with the rest going to commercial real estate.

Disciplined credit culture with rigorous underwriting practices and intensive due diligence has helped it maintain good asset quality. Endorsing the same the corporate loan portfolio is performing well with only one delinquent loan. Though the reduction in sub prime exposure to less than 2% from levels of 5%-7% resulted in high yield being forgone but has also helped to reduce the risk profile.

Huge prospects are seen in the under served middle market corporate lending group despite increasing competition and tightening spreads with a market of approximately $30 billion in 2006 according to an estimate by Standard and Poors. The company targets companies with EBITDA between $5 million and $50 million for direct origination. Of this majority are sponsored by private equity firms and good relationships with them are needed. Reflecting the same it has had early success building an origination platform of national scope leveraging the management relationship with leading financial institutions.

Recent growth in commercial real estate and refinance activities along with leveraged buyout financing are other bright spots to cash on. NewStar Credit Opportunities Fund (NCOF) with equity funding from Och-Ziff and Caisse Depot seems to a good strategy that helps to undertake larger underwritings without reducing its overall portfolio diversification. Apart from the ability to fund bigger deals NCOF provides a steady stream of management fees also and is all set to beat the market.


Member Avatar bmorten (82.31) Submitted: 1/13/2007 2:39:21 PM : Outperform Start Price: $18.91 NEWS Score: -102.20

Smart people; big market.

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