×

Buy Countrywide But Sell Bank Of America?

In the funny business of stock analysis, I found an interesting take on the Bank of America-Countrywide deal. Market Edge Research has a Buy on Countrywideand a Sell on BofA.

The report says BofA's "weak fundamental outlook is being matched by the poor price performance of the stock...BAC's ability to generate future earnings appears somewhat questionable at this juncture when compared to industry averages."

Funny, it says the exact same thing about Countrywide. Exactly. Except it says Bank of America shares are actually "favorably valued" when compared to other stocks in its group, while Countrywide is only "fairly valued." Yet sell BAC and buy CFC. ?? Though the report does say Countrywide "may be downgraded to a Hold in the near future." Better hurry. The stock will soon disappear.

S&P also has a Sell on BofA, with a Hold on Countrywide. "We are particularly concerned regarding BAC inheriting CFC's large Option Arm portfolio, which we believe hasn't been stress-tested yet." S&P, like others, believes Bank of America will cut its dividend to preserve capital, "as its dividend hasn't been earned for the past two quarters."

MORE EMAILS--good stuff:

From "Austin Powers":
"Countrywide transferred me from a major metro office to a medium size city 500 miles away and I loaded the moving truck the first day of bankruptcy rumors. Ten months in this market have been tough dealing with business partners and clients. Most have been supportive. Tougher, though, has been dealing with the information that comes from our leaders. Why BOA retained some of these folks bewilders me... I am a manager in the retail area with high underwriting standards and ethics. Never touched a subprime loan...I like to call those people 'renters'."

From Deric R:
"All the gloom and doom of this Meltdown, did anyone figure that BofA raising transaction fees along with Wamu is a windfall! Just that revenue stream will pay for any losses they get from CW. Also not mentioned is the value of CW’s servicing portfolio. 95% performing and growing. If Bank of America hits the mortgage banking correspondent lending as CW has, they will blow away everyone. The technology of the 2 combines a lot of synergies that are not even discussed. All this fear mongering is coupled with how little America knows about the mortgage business. That is the only shameful thing here."

From Robert F:
"I have been buying CFC recently at the $4 and $5 per share level and voted for the merger. I have done this expressly to turn a profit from CFC share holders pain. Those who were buying in at the high end around $20 per share will lose their shirts on this merger just like the poor people who took loans they shouldn't have and are being foreclosed on. However that's the way things work some will prosper and some will lose on the same circumstances."

From Lynn H:
"In the last 10 months I have sat back and watched Countrywide, and Angelo, be blamed for everything from the decline of the national economy to Global Warming. I just do not understand why no one has ever asked the Countrywide 'victim' where their responsibility falls. I happen to know for fact that there are thousands of people who refinanced, and racked up huge consumer crap (goods) bills, completely over extended themselves, and then blamed Countrywide for them not being able to meet their obligations. Why is every supposed journalist in this country too afraid to write about the other side of this story? It takes no skill, intelligence, or courage to beat up on Countrywide. Kicking a dead dog is easy and pathetic..."

From Cathy K:
"Having been both a top producer and a manager with CW, I left when it became evident that the senior management of CW knew and did not care about the problem loans that were being promoted at CW. The lid on this garbage pail has only been slightly lifted and if Lewis thinks 'He has it right' as far as consummating the buyout of CW, there is a good chance that he will get his hat handed to him within a year. Added to this is the fact that Lewis is retaining some of the major perpetrators of the CW downfall to head up his mistake. If this really takes place, it is going to be interesting to watch, especially if you are shorting BOA."

Questions? Comments? Funny Stories? Email funnybusiness@cnbc.com