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

To: Julius Wong who wrote (1432)	8/6/2007 2:23:50 AM
From: pcyhuang	Read Replies (4) \| Respond to of 4080

re: AHM's valuation Julius: >Friedman Billings Ramsey Analyst Cuts Price Target on American Home Mortgage to Zero You just can't take one analyst's words as gospel, especially not from the firm you cited. Here's quite a different view: The stock had a book value of about $19 per common share at March 31, 2007 after subtracting from common equity $133 million of goodwill. In closing down there will be leases to satisfy (where remaining payments total $142 million or about $3 per share per the 10-K) which undoubtedly can be settled for less, fixed assets and other assets of $209 million or about $4 per share which would be hard to convert into cash and, lets say, $50 million of other closing costs or $1 per share leaving $11 per share for the value of the financial assets minus the financial liabilities that remain. Even if it went into Chapter 11 to protect itself from creditors it very unlikely that the common equity would be wiped out. Equity is wiped out in a bankruptcy proceeding only if the Plan of Reorganization calls for creditors to be paid less than 100 cents on the dollar. The assets are there to pay them off completely leaving a book value of more than $10 per share for the common shareholders. The fact that the stock has been driven down to $.70 makes this stock a bargain. messages.finance.yahoo.com pcyhuang