Weekly Update 4.20.17


Dear Subscriber,

The company that performs a significant amount of servicing of mortgages related to NRV Mortgage Servicing Rights (MSRs) Ocwen Financial blew up today on unrelated legal issues. 

Sucked into the Ocwen Financial vortex today, New Residential (NYSE:NRZ) was down as much as 13% before closing the regular session off 7.65%.

To review, Ocwen handles the servicing for a sizable number of MSRs owned by New Residential (New Residential takes care of the excess servicing). What paniced NRX shareholder fail to realize is that with the touch of a few buttons,  New Residential could move servicing elsewhere were something bad to happen to Ocwen.

Citi came out in defense of NRZ shortly before the close, and my friend FBR's Jessica Levi-Ribner, who introduced me to NRZ in 2015, is telling clients to buy NRZ on the overreaction to the Ocwen news. It's possible, she says, New Residential has already begun transferring servicing rights to its own name, thus protecting it from counter-party risk.

Source: Bloomberg

Shares are higher by 1% after hours.

Action to Take: NRZ is a BUY on the open with a yield above 13%. Because NRZ is owned by a lot of low risk shareholders, the big drop at the open scared them. NOTHING has happened to the value or cash flow of NRZ's MSR portfolio that Ocwen services. Since all this business is digitized, and there are MANY companies licensed to service MSRs in 50-states (including NRZ by the way) this is a case of shoot first and aim later.

PS...on the great LRCX earnings and guidance Wednesday, I am raising our Target Price to $180 and buy under to $150. For those of you in Lam Research under $90 from our initial recommendation, hang on for another 100% gainer. I'm also raising AMAT $target to $70 and Buy Under to $40...this upgrade cycle for 3D Nand and OLED has 1.5-2 years to its peak based on the data we are now getting. 

Putting finishing touches on April Newsletter...needless to say our staying OUT of the Trump Trade and staying long the $trillion is secular transformations in 3D NAND memory, OLED screens, Automated Vehicle Safety and Autonomous Driving, Cloud based AI and Graphic Processing Chips (GPUs) and now the mega Apple 10 upgrade cycle, we continue to CRUSH the overall markets 5% return for 2017 and 22% return since Jan 2016.

WILL be ready to add new plays over next 5-10 trading days...stay tuned!

- Tobin

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