Countrywide Mortgage Takes a Bath While Founder Gets Rich

Author:  Rob K. Blake        Published: June 10, 2008

Paul Tharp writes in the New York Post yesterday on the plight of Countrywide Home Loan stock price taking a beating while the CEO, Mr. Angelo Mozilo, cashes in stock options worth more than $118 million! Anytime the executives start cashing out, you know there’s trouble.

As the nations largest mortgage provider (I wrote a review on them a while back), Countrywide has had a glorious run up in their stock price and when I suggested about a year ago that they were headed for a fall so shorting their stock was a money-maker, people looked at me like I was crazy.

But I shorted them anyway, and here’s why:

1.They have serious exposure to the subprime meltdown through their subsidiary, Full Spectrum Lending.

2.They, unlike depositor banks like Bank of American or Wells Fargo, have no other means of generating revenues except selling home mortgages.

3.Top management like Mr. Mozilo are the founders of the company and treat it like their own personal piggy bank.

4.Lastly, when the market swings the other way, the big boys have the farthest to fall.

Well, this is my week of vindication. Countrywide stock dipped down to $29.50 for a bit yesterday (7-25-07) breaking a support level. My short price was $32 and change. I finally got in the money after waiting almost a year, but I knew it was coming.

By the way, this is the lowest share price Countrywide Home Loans as seen in about three years.

But it will go lower…a lot lower.

Yea, crazy like a fox!

Good Luck

UPDATE 8-6-07:This article was originally posted on July 26, 2007. I thought I do a quick update and show you the continued profit…this time graphically.

See the picture below, it show the current price as of 8-7-07, my original short price, date, and annual return…more than 25%! Not bad…did your mutual fund return 25% last year? Pick your own investments and stick to your guns!

UPDATE 6-10-08:This article was originally posted on July 26, 2007. I thought I do a quick update and show you the continued profit…again graphically. Even from the last update the stock fell dramatically…as I predicted.

See the picture below, it show the current price as of 6-10-08, my original short price, date, and annual return…more than 65%! Not bad…did your mutual fund return 65% last year? Pick your own investments and stick to your guns!

Author: Rob K. Blake