Expert: Paul Henneman - 3/9/2008

Question
Do you think Countrywide is a great buy at its current Price?  

Answer
Aaron,

Thank you for your question!
No, I think that there is incredible risk in any firm that has exposure to the housing market. As bad as this market is, there is more to come. The majority of adjustable rate mortgages have yet to adjust, foreclosure rates are incredibly high and rising, and housing prices are falling. There are several more years of this to come, probably 2010 is when it will finally have worked itself out.
There is a possibility that Countrywide's stock price has taken all of this into account, and over adjusted meaning that it is at its low. But, not likely. The problem will be that as the housing market continues to fall, investors will continue to turn away from this industry in the stock market. All companies in this industry are at risk.
Only if you are a real risk taker should you even consider something in housing. And even then, perhaps a very small investment now, adding to it each quarter if things look good to you.

My firm, ValuEngine.com has a strong sell on CountryWide, with the stock price significantly overvalued at its current level.  I have pasted in our projected returns 1 month through 3 years out below, I hope that this comes through:

ValuEngine Forecast
           Target
              Price*    Expected
                       Return
1-Month    4.24    -5.54%
3-Month    3.75    -16.43%
6-Month    3.34    -25.68%
1-Year            2.77    -38.30%
2-Year            3.46    -23.03%
3-Year            4.77    6.31%

I hope that the format of the above table comes through. Our current fair value, what the stock should be trading at given the companies current financials, is $2.15, substantially lower than the actual price of about $4.49

You can read about how we create the above estimates here:
http://www.valuengine.com/pub/main?p=0


I hope that this helps, please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc