Redwood Trust, Inc. (NYSE:RWT)

Breakout on High Volume

No leverage is always the way to go if you can. We are in a place where no one has gone before. Cash is king.

If the economy does pick up this year, this trust should do well.

my boy Pat

high yield REIT

I'm probably a bit early on this, but I want to have an incentive to follow it long-term. Redwood has spectacular management and they are pretty conservative in their long-term economic outlook. Book value is around $11 - $12. My belief is that the housing market will continue to stay down and prices will drift downward further for the next few years, but there will still be good opportunities for mortgage REITs at some point in the future. Just don't know when. Don't be surprised if RWT falls down another 10% - 20% before that time comes. Long-term, however, I believe they are a winner.

Should be able to return to profitability within the next few years.

Took advantage of investing in Residential MBS earlier this year at distressed prices and backed off when others were jumping on the bandwagon.
They are sitting on alot of cash.
They are looking for a possible opportunity in commercial properties in 2010.
Plus, I just like the Pres. Martin S. Hughes and the CIO Brett D. Nicholas. They're Co-Chief Operating Officers and seem to have Buffett like attitudes.

Grants Investment letter - salvaging mortages

Heavy losses the past few quarters. This company is struggling hard. The market is tough right now, but among its competitors this company is having a hard time bouncing back. Although it will be a while, this company may do well in the future.

Do I even have to explain? Negative to minimal earnings, negative cash flow, long term debt and a P/E of 186. Also, I am shorting all of the stupid bounces today like this one and its 30% simply because the government gave some taxpayer money to citigroup. We shall see how well that works out for this company and others.

Hello free CAPS points

Debt to equity of over 12
balance sheet decreasing!
REIT!
large funds bailing selling tons of shares!
Uh Oh!
also
Oh Dear!

Although it will be rough in the near future, this company has the foundation in place to maintain it's operations and expand when the market begins to calm. I'm anticipating $45-$50 around 4 years out, with steady $3/year dividends.

Likely no special or a greatly reduced special this year, and possibly next.

Debt/Equity = 12

PEG 2.12

Trouble

1. Managers of the company are experts in the mortgage field. They have a long term positive track record. They predicted the current problems more than a year ago and prepared for it by raising cash. Although the problems they predicted are greater than they anticipated, I believe the managers know what they're doing. They manage the company very conservatively and are honest with their accessments which are fully disclosed in a quarterly report called "The Redwood Review". This report is not lite reading and it helps to be well versed in accounting and the mortgage field to fully understand it, but the good and the bad is there for analysis. There are definite risks (like a complete melt down of the economy with many more people walking away from the mortgages), but I think investing at the current price more than justifies the risk. Furthermore, the managers are also heavily invested in the company and the company will buy back shares if the price gets low enough (which is what they did in the late 1990s).

2. A large amount of the losses reflected in the financial statements are due to "mark to market" paper losses. There was and will continue to be pain due to "actual" losses but I don't think it will be enough to justify the current discount in the price. Cash flow will decrease in the short run (6 months to year and a half) due to these actual losses probably requiring a dividend reduction. However, once available cash is fully deployed, there will be a rebound in the cash flow and dividend that will justify a higher stock price. It's important to recognize the company is financed through equity and long term debt and does not have liquidity issues. This makes it possible for the managers to be patient and they will eventually take advantage of the dislocations in the markets they understand so well.

This stock is a great buy right now. The blog that was written last week was from an uneducated, misadvised hedge fund who was writing it in their best interest to lower stock prices.

The credit crises and morgage meltdown in the U.S. isn't going anywhere this summer and is likely to only get worse. If Bear Sterns couldn't survive what hope is their for the rest of the financial sector. Yes, the financial sector seems to be jumping back and key reversals seem to be lifting bullish investors, but this ray of hope will end once investors understand how bad this looming recession is going to be. Even the hopeful and growing few in the financial sector are going to suffer from the troubles of the many.

Overvalued, significant ALT-A exposure, no catalysts for growth.

33.48