AAMC - Altisource Asset Management

[thepupil]

jay, yada, valuetrap et al. any thoughts on the q?

 

IMO either AAMC be down more or RESI should be down less. If RESI can't keep a 1X multiple, growth in AUM gets a little harder and AAMC is hyper levered to RESI growth. AAMC should have a higher "beta" to RESI and move like a levered RESI (because that's what it is) in my opinion

 

Jay, are you buying RESI here? Ar you effectively betting that more of the unrealized gains and REO will become realized and leased up rentals and people will re-rate RESI back to above book and they can restart the issuance machine?

[jay21]

jay, yada, valuetrap et al. any thoughts on the q?

 

IMO either AAMC be down more or RESI should be down less. If RESI can't keep a 1X multiple, growth in AUM gets a little harder and AAMC is hyper levered to RESI growth. AAMC should have a higher "beta" to RESI and move like a levered RESI (because that's what it is) in my opinion

 

Jay, are you buying RESI here? Ar you effectively betting that more of the unrealized gains and REO will become realized and leased up rentals and people will re-rate RESI back to above book and they can restart the issuance machine?

 

I need to look more into the accounting, but I think that BV understates FV and you are buying at a discount to BV...

[ItsAValueTrap]

A lot of things can happen in the next three years.  Maybe RESI won't always try at a yield higher than 10%.  If so, there will be an opportunity for AAMC to grow its AUM.

 

2- Why would you bet against value creation when you can bet against value destruction?  If you had bet against junior miners or independent oil and gas companies, you would have had a good year.

[thepupil]

RESI @ 86% of tangible on stuff not really related to what it does. Accretion cycle broken or big opportunity?

 

May $17.50 puts @ 2.30 = 13% gross return (twice-ish that annualized), breakeven at $15.20 (66% of book). If you think Bill Erbey has bought cheap assets and is creating value, that's a no brainer.

 

[ItsAValueTrap]

RESI @ 86% of tangible on stuff not really related to what it does. Accretion cycle broken or big opportunity?

 

May $17.50 puts @ 2.30 = 13% gross return (twice-ish that annualized), breakeven at $15.20 (66% of book). If you think Bill Erbey has bought cheap assets and is creating value, that's a no brainer.

 

You're talking about selling the puts?

 

The thing about book value is that RESI is affected by macro factors.  So theoretically it is not quite an easy lay-up.

 

2- In general, I'm more comfortable owning what insiders own (e.g. AAMC seems more interesting than RESI).

[thepupil]

I would not sell them but I'm in the minority in my skepticism of RESI/AAMC. I am unsure if RESI is buying assets cheap or if they are building value (since vast majority of revenue is still unrealized appreciation and it is taking them several years to go through all these NPL's).  If RESI continues to fall without AAMC collapsing I would be pretty tempted to buy RESI and short some AAMC, but not at 86% of book.

 

But if I wasn't a paranoid Erbey hater, then I would sell those puts. I'm just pointing out that there are juicy, low risk (according to yada, RESI buys things super cheap and therefore the assets are low risk) returns to be had.

 

Getting paid 26% annualized to bear the downside below 66% of tangible book seems like a great way to profit from RESI/AAMC instead of paying 80% of AUM for the manager of RESI. I'm pointing out what I think is an inconsistency. AAMC is a RESI call option. A call option on its growth and success and literally its profits. It owns a percentage of its profits. If you like AAMC, you have to think book value of RESI is going up (since RESI will have positive earnings to pay dividends and pay AAMC) and is money good. If book value is growing then the downside below 66% of book should be quite low, so to me if bullish of the RESI/AAMC story, selling those puts is a great trade. Money good 13% returns in 6 months are a nice thing.

 

Liking AAMC but not being comfortable with RESI because of macro concerns doesn't make much sense to me. If RESI doesn't work because of macro, AAMC will get destroyed.

 

I know 13% gross and 26% annualized may seem low compared to the 5X in 10 years that is AAMC's potential or whatever. But for those who like this story (not me), it seems like a good trade and you don't have to bet on what Ben Lawsky is going to do (at least there aren't any problems with RESI / AAMC so far, right?)

[thepupil]

RESI now at 80% tangible. AAMC starting to sell off like it should since the lower RESI goes the less easy it is for it to raise capital and for AAMC to grow into its still lofty multiple.

 

Anyone buying here? If not where would you care?

 

12% dividend yield if you believe earnings are real/will grow, very good asset backing if you think Erbey bought well.

[thepupil]

the valuation discrepancy between AAMC and the rest of the Erbey tainted family is pretty striking.

 

the companies that perform vital functions for the economy (OCN) and own hard assets (RESI) are at depressed valuations.

 

AAMC is at $1.1B EV (common plus preferred) despite managing just $1.3B of RESI equity, making it by far the most expensive asset manager / GP out there and baking in a ton of AUM growth despite some serious bumps in  the "Erbey is a genius" narrative.

 

Also if that narrative is no longer intact, might RESI start looking for a new GP, one that doesn't charge costs + 50% over a low hurdle of earnings (all of which are non-cash)?

 

Single client asset manager, highest in industry fees, founder just kicked out, only client not seemingly able to raise more capital above book

 

I wish I had the balls to short this again...

[thepupil]

so yadayada, you wan't to apologize about being an overconfident and condescending nincompoop with respect to AAMC and your insistence on me not understanding anything?

 

Or would you like to make the case that my dancing on Erbey and AAMC/RESI's grave is premature and that I'm the overconfident nincompoop?

 

I'd be interested if anyone is looking at buying NPL's at well below tangible book here (RESI)? Or the right to get the juicy incentive fee on those (AAMC). After all the price on offer is 77% below where yadayada first found it "attractive".

[jschembs]

so yadayada, you wan't to apologize about being an overconfident and condescending nincompoop with respect to AAMC and your insistence on me not understanding anything?

 

Or would you like to make the case that my dancing on Erbey and AAMC/RESI's grave is premature and that I'm the overconfident nincompoop?

 

I'd be interested if anyone is looking at buying NPL's at well below tangible book here (RESI)? Or the right to get the juicy incentive fee on those (AAMC). After all the price on offer is 77% below where yadayada first found it "attractive".

 

I like this board more when we aren't throwing stones at a failed investment thesis - just makes folks reticent to speak up in the future.

[yadayada]

I was clearly stating that i was discussing potential upside scenario's. There has been no new information making this invalid. You lack reading comprehension through out this whole discussion.  Because that is how you figure out what a stock is worth. You discuss various outcomes, and try to figure out how likely they are. I was just trying to understand what some of those hedgefunds saw when they bought at 1k$ per share. But you clearly did not understand this concept apparantly :/ .

 

Also if you think a shareprice (especially when there is panic surrounding the stock) always represents its true intrinsic value, what the hell are you still doing on this message board.

 

btw have you actually read one of their annual reports in the meantime?

 

Oh and I never owned this stock.

[thepupil]

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so yadayada, you wan't to apologize about being an overconfident and condescending nincompoop with respect to AAMC and your insistence on me not understanding anything?

 

Or would you like to make the case that my dancing on Erbey and AAMC/RESI's grave is premature and that I'm the overconfident nincompoop?

 

I'd be interested if anyone is looking at buying NPL's at well below tangible book here (RESI)? Or the right to get the juicy incentive fee on those (AAMC). After all the price on offer is 77% below where yadayada first found it "attractive".

 

I like this board more when we aren't throwing stones at a failed investment thesis - just makes folks reticent to speak up in the future.

 

You're right. Maybe I'm being the jackass now (and the only reason I bumped this thread was because I thought yadayada was being a jackass earlier so I'm no better). Let me rephrase.

 

It is time to reassess RESI / AAMC as potential longs/shorts given the big moves in their stock price. 

 

RESI is at 71% of tangible book. AAMC is down 77% since beginning of thread. Since the market cap of AAMC is now about equal to the market value discount to RESI, book you can actually buy the entire economics of the business by purchasing RESI/ AAMC in 70/30 proportion, assuming that RESI keeps AAMC as its manager, which gets me to the next thing.

 

There has been no real new information on either vehicle with regards to the fundamentals. Yadayada is correct, there.

 

Except for the issue that Erbey is no longer on either board, so arguably his ability to keep AAMC as RESI's GP is compromised which makes AAMC even more binary than it already was. And with a much lower price the upside scenario is even greater. A single client asset manager that loses its client is worthless, and the upside from 30% of current AUM is a lot better than at 100%.

 

yadayada, my view was that AAMC was a very expensive call option on RESI and Bill Erbey's success and that the fee structure is terrible. The call option has dramatically repriced. As you point out, intrinsic value has not been determined and RESI is still very much an unproven (either to the upside or downside) vehicle.

 

Neither of us made or lost money so we are both denied the pleasure of schadenfreude; if only we backed our impassioned debate with real money!

 

I am trying to resurrect discussion here since these two seem to be brought down by all the OCN / ASPS stuff. The way I did it was not the right way and was immature. 

[thepupil]

as an aside, watching stocks you thought were dumb/bad bets/(insert negative here) go down is an intoxicating drug, at least for me. Like most drugs, it's dangerous and may make you say or do things you otherwise wouldn't (like run a short book or gloat at yadayada).

[thepupil]

I was clearly stating that i was discussing potential upside scenario's. There has been no new information making this invalid. You lack reading comprehension through out this whole discussion.  Because that is how you figure out what a stock is worth. You discuss various outcomes, and try to figure out how likely they are. I was just trying to understand what some of those hedgefunds saw when they bought at 1k$ per share. But you clearly did not understand this concept apparantly :/ .

 

Also if you think a shareprice (especially when there is panic surrounding the stock) always represents its true intrinsic value, what the hell are you still doing on this message board.

 

btw have you actually read one of their annual reports in the meantime?

 

Oh and I never owned this stock.

 

I think I do often misread your writing (throughout this board but in particular on this thread) as absolute, all-knowing and overconfident statements; you are probably a nicer, humbler, more reasonable person in real life than you appear and many here probably think I'm a prick. It may be a cultural / language thing (I think you mentioned you are european and you do the whole put the currency sign after the number thing which Americans don't).

 

anyways, back to stocks. There seem to be plenty of people wading into the OCN/ASPS quagmire. Is anyone looking at RESI / AAMC?

 

[writser]

I think I do often misread your writing (throughout this board but in particular on this thread) as absolute, all-knowing and overconfident statements; you are probably a nicer, humbler, more reasonable person in real life than you appear and many here probably think I'm a prick. It may be a cultural / language thing (I think you mentioned you are european and you do the whole put the currency sign after the number thing which Americans don't).

 

I'm probably a prick too for derailing this thread but I can't resist. I agree completely with you. Yadayada has been racking up a huge number of posts in a year and knows a lot about natural sweeteners (position down 40% since his last posts), second-hand mining equipment in Indonesia (position down 30% or something since the discussion about that) and now mortgages in America (position down God knows how much). Not to mention that he also knows a lot about Japan economic policy, oil macro and cotton spreads in China.

 

Yet, in the Senomyx thread it turned out that he didn't understand how to read insider filings and that he didn't know the difference between option grants and open market stock purchases. In the Intralot thread he learned that 'minority dividends' are not for common shareholders - after holding a position for a couple of weeks (and this was utterly crucial for the valuation) .. And he managed to lose 25% over the year with a diversified portfolio - significantly underperforming any possible benchmark. Not to mention that he frequently opens topics on a) companies that already have a topic or b) companies with no content whatsoever except for 'I saw this idea on VIC'. Or posts links that other people literally posted one hour earlier, making me wonder whether he even reads what other people write.

 

His posts are usually eloquent (if you ignore all misspellings) so I assume he is intelligent but if you make these kind of mistakes and display such behaviour I have a very hard time taking seriously any of your posts on, well, basically anything and I agree that at the very least you could be a bit more humble. And frankly, post a little bit less.

 

By the way, it wouldn't surprise me if he left the forum after another bad year. I also think it is highly unlikely that he is managing any serious money. The whole style of the account reminds me of Dutch students maxing out their cheap student loans to 'invest'.

[Picasso]

It is sort of funny watching these things play out.  No matter how much a successful investor will say "stay within your circle of competence" and "only swing at the balls you can't miss" there are still plenty of us that completely break those rules.

 

I attribute that to compelling writeups from sites like VIC or Seeking Alpha.  The write-ups are so well written and just vague enough to make it hard to nail down the margin of safety.  Instead of looking for our own bargains, some of us (like yadayada) are taking cue from other investors pitches and breaking rules that are not meant to be broken.

 

Everyone should remember that this is a competition and as friendly as the people on this board are, we're really out to take each others money.  No value is being created and we're just trying to find ways to profit on the irrational sell/buy orders that push prices to unrealistic levels.  Sometimes the person on the other side of those trades happen to be a board member.

 

Some on this board probably think I'm a prick as well but I go in with the understanding that none of us are really "friends" and we should be trying to dispute claims of both postive/negative views so it can strengthen the case for any particular position you end up taking.

[yadayada]

writser feel free to not read my posts if you are so annoyed by them. There actually is an ignore function (go to your own profile and add me to your ignore list). I use this board to throw out my opinions and see if people disagree with them. And yeah, sometimes they are not very well informed. Sometimes Im wrong or ignorant. Incidently the things I feel least confident about I put little or no money in (except for ASPS damnit). But doesn't stop me from discussing them sometimes.  But you seem to take all of this very seriously. I mostly post arguments and see how well they hold up against counter arguments, and I enjoy that process. For example the Japan situation looks really bad, and I post the argument here to see if I am missing something and possibly warning people who are not aware of it. You seem to be merely annoyed by me posting an opinion. You even seem to be annoyed by the possibility of me losing money! Lighten up man.

 

I mean you can always not click on a new thread I make... Is it illegal to post an idea from VIC, because I want to get a better understanding about it? I see a lot of threads being opened about companies with zero effort in the OP. I think I contributed quite a bit of usefull information to this board as well, besides making some garbage posts as well. But it is a fkign internet forum, stop taking it so seriously.

 

 

[krazeenyc]

In defense of Yada, he's probably just a young guy -- who like everyone else is learning.

 

Also sometimes it's just the way some people deliver information. For example, my wife complains that when she asks me a question and I don't know the answer.  I too often answer her knowingly as if I know the answer -- when really I'm speculating. She says I should just say "I don't know". I tell her:  If you ask me about something I likely know nothing about -- I'm probably speculating. 

 

I don't think we should assume anyone -- unless they're some famous mad scientist -- knows anything about the artificial sweeteners Senomyx is developing.

[thepupil]

In defense of Yada, he's probably just a young guy -- who like everyone else is learning.

 

Also sometimes it's just the way some people deliver information. For example, my wife complains that when she asks me a question and I don't know the answer.  I too often answer her knowingly as if I know the answer -- when really I'm speculating. She says I should just say "I don't know". I tell her:  If you ask me about something I likely know nothing about -- I'm probably speculating. 

 

I don't think we should assume anyone -- unless they're some famous mad scientist -- knows anything about the artificial sweeteners Senomyx is developing.

 

Yes, I think it is an issue of presentation. Clearly yadayada was not as certain on AAMC as he appeared. He did not buy any stock or lose money. I don't mean to pour on the hate here or damper enthusiasm (which clearly there is a lot of at 2K posts).

 

I am probably just as young or younger and certainly am no expert investor. I've bought (and mentioned here) small positions in things with tons of upside that have ended in tears so far (PWE calls, a little MWE.TO) and seen AAMC esque drawdowns and have started threads and had much bigger positions in things that are so far pretty mediocre (EQC/CWH and ACAS).

 

I've gone into the lotto tickets with eyes wide open on downside, and I think yada's eyes may be a little more open than they appear. There is just a lot of "obviously" and "basicly" (sic) going on that it turns me off and I think others may be in the same boat.

 

But if yadayada wants to throw random shit out there and have people tear it apart and argue with him, he is allowed and the board is probably made better for it. I at least hope someone out there avoided (or shorted) AAMC based on these arguments. And they wouldn't exist without the thread being started and continued by yada. 

[writser]

In defense of Yada, he's probably just a young guy -- who like everyone else is learning.

 

Probably. But if you're young and you want to learn stuff, should you post stuff like this?

 

Also if you think a shareprice (especially when there is panic surrounding the stock) always represents its true intrinsic value, what the hell are you still doing on this message board.

btw have you actually read one of their annual reports in the meantime?

 

There's far more where that came from. Fortunately yadayada is smart enough to delete his most grieving posts (for example the one about 'fkng muslims' right after the Paris attacks) ....

 

Frankly if you don't know how to read an insider filing and don't know what minority dividends are I think you should understand that maybe the whole ASPS / OCN / AAMC situation is a bit too complex for you and shut up, watch and learn. But yadayada is presenting his thesis here like he is the new Bill Ackman. I think he is fooling himself (and maybe some other readers) into believing he understands anything at all about these companies. The bold faced part is why I decided to derail this thread: new forum members might see his postcount and could think his advice is actually valuable - if it was only for me I would gladly ignore him.

 

Imho it is striking that within a couple of minutes several forum members sent me a private message to say they agree with me. You are not the only one who feels this way thepupil.

[merkhet]

I feel the need to point out two things:

 

(1) No, everyone is not entitled to their own opinion. (http://theconversation.com/no-youre-not-entitled-to-your-opinion-9978) People are entitled to the opinions to which they have given actual thought.

 

(2) There have been a number of posters who have appeared over the last year or two who seem to know very little and yet seem to possess absolutely no humility. Aside from making this board demonstrably worse, it is also a potentially dangerous situation for the poster.

 

Sorry to hijack this thread.

[Vish_ram]

I feel the need to point out two things:

 

(1) No, everyone is not entitled to their own opinion. (http://theconversation.com/no-youre-not-entitled-to-your-opinion-9978) People are entitled to the opinions to which they have given actual thought.

 

(2) There have been a number of posters who have appeared over the last year or two who seem to know very little and yet seem to possess absolutely no humility. Aside from making this board demonstrably worse, it is also a potentially dangerous situation for the poster.

 

Sorry to hijack this thread.

 

+1

 

Like Buffett's 20 punch card rule, if Parsad implemented a "one post/day" or "one post/topic/day" rule, the quality of discussion will improve exponentially.

[ItsAValueTrap]

Instead of being negative, you guys could do something productive like... discuss AAMC.

 

Right now, AAMC is an asset management company at a reasonable valuation.  ASPS looks like a better idea though.  If you go by P/E or adjusted P/E, ASPS is clearly far cheaper... unless you are willing to put a huge premium on AAMC's higher growth.

[thepupil]

Instead of being negative, you guys could do something productive like... discuss AAMC.

 

Right now, AAMC is an asset management company at a reasonable valuation.  ASPS looks like a better idea though.  If you go by P/E or adjusted P/E, ASPS is clearly far cheaper... unless you are willing to put a huge premium on AAMC's higher growth.

 

agreed. what was said was said and no need to belabor or pile on.

 

Glenn, do you think there is any chance that RESI fires AAMC given the changes in board composition and holes poked in the "ocwen advantage" part of the thesis? Is that just me being a hater/negative nancy? Wouldn't say Blackstone (the largest SFH landlord) or the number of bidders on NPL portfolios being willing to take control of RESI for a much lower fee structure? Without Erbey there to protect AAMC's interest, it seems plausible. But I'm sure Erbey lackeys comprise the majority of both boards so perhaps they will stick with AAMC (like a battered wife).

 

 

[ItsAValueTrap]

Instead of being negative, you guys could do something productive like... discuss AAMC.

 

Right now, AAMC is an asset management company at a reasonable valuation.  ASPS looks like a better idea though.  If you go by P/E or adjusted P/E, ASPS is clearly far cheaper... unless you are willing to put a huge premium on AAMC's higher growth.

 

agreed. what was said was said and no need to belabor or pile on.

 

Glenn, do you think there is any chance that RESI fires AAMC given the changes in board composition and holes poked in the "ocwen advantage" part of the thesis? Is that just me being a hater/negative nancy? Wouldn't say Blackstone (the largest SFH landlord) or the number of bidders on NPL portfolios being willing to take control of RESI for a much lower fee structure? Without Erbey there to protect AAMC's interest, it seems plausible. But I'm sure Erbey lackeys comprise the majority of both boards so perhaps they will stick with AAMC (like a battered wife).

 

No idea.  If you believe that the accounting isn't crooked (and I like Altisource's accounting), then AAMC has done a really good job as an asset manager.  If AAMC really does generate high returns without taking on excessive risk, then they're really good at asset management.  If that's true, then they will over the long run attract a lot of AUM.  Even if RESI leaves they may be fine.

 

The contract does punish RESI for firing its asset manager.  It would shrink AUM at RESI and make it difficult for them to raise capital, so I think the board of directors are incentivized not to do it except in extreme circumstances.