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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (19374)	7/1/2004 10:16:59 AM
From: Bob Rudd	Respond to of 78516

Madharry: I share your concern on WM. On various financial shows, WM was criticised for lacking skills to manage risk over the rate cycle. Essentially the claim was that they bought their way into the mortgage banking biz and thus failed to develop the skill sets of those like Countrywide who grew it organically and is considered a master at it. Fortunately mortgage banking is only 15% of revenue or this could be a lot uglier. There was also some fault finding about lack of integration - always difficult when large mergers are recent. As value investors we look at price vs retrospective earnings...and on this score WM has looked good. What's a helluva lot more difficult is prospective evaluation of the above 'intangibles.' My tentative [It could change by noon as I dig further] view is that 2004 will be used to bury a lot of costs/issues and thus may see further writedowns, but the sun should come out in 2005 when they are expected to earn in the $4's with favorable 03 comps...if they get their act together. One significant possibility would be they get bought out by someone that CAN manage the rate risk and integration. Speculation on this is likely keeping prices higher than recent performance would imply. Because Nygren owns so much, I wouldn't look for candor about his 'concerns.' It's tough for folks with 'Skin in the game' to be publicly [or privately] objective.