Hmmm... Most of the time when a company layoffs people, it goes up yet not by much. Well be interesting in how the Market interprets this information. What is interesting is that this recent massive layoff was announced after the Market closed and on a Friday. In after-hours trading it went up 19 cents after the announcement. Definitely will wait and see .........
As the adage goes, one buys on rumor and sells on news. Or........conversely, shorts on rumour (British version, cute, huh?) and covers on news. And the news is good. Responsive. Less overhead (in what isn't a capital intense business anyway). Ratio of revenue per employee should increase over time. Name recognition is STILL there and there is ALWAYS some demand for housing and in turn............funding. And............with a buoyant secondary market. Ax flush with inventory to evenutally merchandise.......Higher. IF price is a discounting mechanism, this event was discounted long ago.
But, this isn't AHM, it's CFC. NYSE listed stock with 576 million shares outstanding. Each, held long by someone. Floating portion representing potential orderflow to the specialist. And the portion sold short (thus having two present owners) representling predictable identified prey to that specialist. All in all, the merchandising of paper. Bought at wholesale, sold at retail. We're in the ..............eh..........wholesale stage at present. $42 to $15 has already occured. IF you want to expand to fundamental matters, 10 billion in revenue (irrespective of EPS or any other fundy) isn't all going to completely evaporate. 8x leverage, regardless of secondary market, is hardly imposing for a lender. This is not a capital intense business. Few barriers to entry,...............making name recognition go just a little farther and marginal mom & pop localized producers susceptile first. Less employees, less competition. I can LOL too.
So you're saying that AHM was NOT an NYSE listed stock with shares outstanding each held long by someone blah, blah, blah orderflow to the specialist? Is that your understanding of the matter? Tell me.
You don't layoff 12,000 employees expecting business to be good. Short term-blip up for the stock before a last gasp. They don't need the employees because there is no work for them, few new mortgages are being written. When the CEO tells you how bad things will be going forward take his advice and get out of the way on the stock. Alot more pressure on the stock to come. """""Countrywide Chief Executive Angelo Mozilo said in a letter distributed to employees Friday. He also called the current market cycle "the most severe in the contemporary history of our industry." "During the past two years the growth in home price appreciation has stopped dead in its tracks and in many areas of the country it has turned in the wrong direction," Mozilo said in the letter.""""""" CFC's earning are going to tumble putting further pressure on the stock. Falling earnings in addition to any lawsuits, gov investigation into loan writing practices etc will hurt the stock. Near term-the layoff may give a tiny blip up but thats about it, a last gasp. Mozillo doesn't expect business to turn around in 08.....he's right The stock is dead money long for months to come. The current trend will not reverse anytime soon, you have months to wait before you would want to think about this stock long. Pick your spots for short entry trades.
There will be a time to buy this POS again on the next major dip after more blood in the water. I'm waiting for the next 10% or more drop. Wait for new 52 week lows below $15 I hope in the coming days. Buy that dip big dip and cash the hell out on the rate cut, covering, Bank of A BS deal type deal or takeover rumor. There is some juice here to the downside. This will not pull an AHM BK.