Good time to buy BSC?

niffe9 · #1 08-06-2007, 02:16 PM

I read this about a month back. BSC has dropped another 40 points since then and the price to book value is looking pretty low. I am very new to investing and was looking for some insight. My main investment thesis is a contrarian one where people are overreacting to a setback of an established and strong financial. Help me poke some holes in this buy idea.

As an aside, there is a good article on firing Spector on page 1 of wsj found here It's free.

quant_trader · #2 08-06-2007, 02:28 PM

Nah.. if anything buy companies like GS rather than BSC.

niffe9 · #3 08-07-2007, 01:42 PM

more commentary and analysis would be much appreciated...

Phone Booth · #4 08-07-2007, 07:24 PM

[ QUOTE ]
I read this about a month back. BSC has dropped another 40 points since then and the price to book value is looking pretty low. I am very new to investing and was looking for some insight. My main investment thesis is a contrarian one where people are overreacting to a setback of an established and strong financial. Help me poke some holes in this buy idea.

As an aside, there is a good article on firing Spector on page 1 of wsj found here It's free.

[/ QUOTE ]

What premium to its book value should BSC trade at? What is the likely impact of the present crisis on their mix of businesses? Most insiders seem miffed at the firing of Warren Spector (easily the most respected person from Bear on the street, until now) - what does this reflect and how is this going to affect the company? You should at least try to answer these questions.

pig4bill · #5 08-08-2007, 01:14 AM

[ QUOTE ]
I read this about a month back. BSC has dropped another 40 points since then and the price to book value is looking pretty low. I am very new to investing and was looking for some insight. My main investment thesis is a contrarian one where people are overreacting to a setback of an established and strong financial. Help me poke some holes in this buy idea.

As an aside, there is a good article on firing Spector on page 1 of wsj found here It's free.

[/ QUOTE ]

It was an established and strong financial.

And where are you getting that book value from? Does it include the impact of their cratered hedge funds? Does it reflect the true marked-to-market value of any garbage paper they may be holding?

Phone Booth · #6 08-08-2007, 10:42 AM

[ QUOTE ]

It was an established and strong financial.

And where are you getting that book value from? Does it include the impact of their cratered hedge funds? Does it reflect the true marked-to-market value of any garbage paper they may be holding?

[/ QUOTE ]

Yes and yes. They are a broker-dealer who seldom engage in directional bets, so unless you're implying that there may be fraudulent marks, it's likely to reflect their true position. Note that there is no real market-wide liquidity crunch at the moment (price decline =/= liquidity issues).

pig4bill · #7 08-08-2007, 08:14 PM

I don't think anyybody has marked their subprime and alt-a paper down to true market, so if they're holding any, they probably haven't either.

Again, where did you get this book value from? If it's from their last 10Q, it's way out of date. You've heard of their hedge fund bankruptcies? BTW Bear is a lot more than a broker/dealer.

Phone Booth · #8 08-09-2007, 09:39 AM

[ QUOTE ]
I don't think anyybody has marked their subprime and alt-a paper down to true market, so if they're holding any, they probably haven't either.

Again, where did you get this book value from? If it's from their last 10Q, it's way out of date. You've heard of their hedge fund bankruptcies? BTW Bear is a lot more than a broker/dealer.

[/ QUOTE ]

Again, since Bear is a market maker and believe it or not, most of these things (or comparables) *are* trading, you're accusing their traders of fraud or suggesting that there is some sort of liquidity crisis we have yet to see evidence of. Note that most of their credit exposure is hedged. As for their BV, Bear has very recently said that they've made money since last time they reported. So their book value is up from then, not down.

Yes, Bear is a lot more than a broker-dealer - most of their other businesses (beyond clearing/prime brokerage and debt underwriting, which we're including above) have little book value risk. Hedge fund bankrupcies, beyond the actual capital they had at stake and the difference between the loan they made and the collateral they received in return (likely not too high - they may lose 10-15% at most) will not impact their book.