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Strategies & Market Trends : Ocwen Asset Inv. Co (OAC)
OAC 15.43-5.8%Jan 21 4:00 PM EST
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To: Labrador who wrote (4)2/6/1998 6:20:00 PM
From: George T. March  Read Replies (3) of 64
 
Well Bob, I hope you bought this stock for the yield, because the principle is in for some hard times. The stock is down about 3 points today with over a million shares traded and will probably be lower next week. The apparent cause of this downslide was the press release and conference call by Owen Chair Erbey and Pres Reich telling us that they will be chalking a loss in the quarter of some 20+ cents and 3 cents for the next quarter. More than the announcement, it was the way they answered the analyst calls. Not exactly inspiring. The problem with this business is that the management is not sure of what they are doing. Their fortunes are totally dependent on the yield curve and a spread between the libor rate and the ten or thirty year rate. If it is inverted or flat, they are in a losing position. Long term there purchases and sales of mortgages are calculated to provide a nice yield of over 15%. And if the prepaid are not too bad, they will make a good return. Unfortunely, the management is not as good as you or I in predicting rates or the curve. You should take the time to listen to the conference call. The tele no is 1-800-677-8851, code 1515. It's both interesting and informative. They say the dividend for 98 is probably secure, but I don't have much confidence in their forecasts. I would be interested in other opinions of the conference call. These mortgage reits are great vehicles for profit or lose. Regards...george
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