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

To: Grommit who wrote (29170)	12/5/2007 5:47:15 PM
From: E_K_S	Read Replies (3) \| Respond to of 78752

Hi Grommit - Re. RAS - There were 21 insider buys totaling 315K shares since August 1, 2007 at prices between $6-$8.90/share. Their 3rd quarter 2007 financial report highlighted these results: raitft.com Financial Summary -- Economic book value of $13.27 per share at September 30, 2007 -- Tangible book value of $11.63 per share at September 30, 2007 -- Adjusted earnings per share of $0.54 for the quarter ended September 30, 2007 -- GAAP total loss per share of $4.02 for the quarter ended September 30, 2007 My thought is when the Paulson recovery plan is announced Friday (Five-Year Mortgage Rate Freeze Looms biz.yahoo.com Bush Mortgage Plan Will Freeze Certain Subprime Interest Rates for 5 Years) it will reduce the fear (of defaults) on the street for these Subprime loans. In fact it might allow the market to better value and price all SIVs products. Most of RAS's paper is loaded on the commercial side not subject to possible subprime defaults. However the market still has a problem valuing all SIVs, many of those that RAS owns in their REIT. It is my opinion that this stock has a significant discount built into the current price which represents (1) overall portfolio mortgage "quality" and (2) "investor fear" of default. My WAG to economic value is based on their most recent report (above) dated 11/05/07 at $13.00/share. I expect the dividend to be reduced to $0.20/share to $0.30/share per quarter or yield between 6%-9% with a $13.00/share price target. Based on the current price level, the market seems to have built in a 30% discount to fair economic value. This large discount shows that the market has a different value perspective. So you may be right as to what their "real" portfolio value is worth (or if it is even known). Their dividend announcement for the fourth quarter comes up in two weeks (12/19/07) so it should provide a bit more clarity as to what the true yield is. No doubt a risk, but if their revenue streams continue from their basket of mortgage backed securities AND the fear premium diminishes, this stock could go back to $13 and yield 6%-9% for many years. EKS