COOP: quick update on Q3 results

COOP reported solid and relatively uneventful Q3 results last week – this post will provide a quick review and update. Quarterly operating cash EPS was incredibly strong at $1.80/share. As a reminder, this figure is burdened for amortization of the embedded MSR fair value gain, so it correctly reflects a reasonable estimate for the current economic cost of replacing servicing runoff. Mortgage rates again declined in Q3 (~10bps), although the pace has slowed considerably vs. the first half of this year. Refinancing volumes remained well above-trend, further exacerbating what was already an incredibly tight supply/demand backdrop. The industry was reducing […]

COOP: variant fundamental thesis is playing out

This post is a bit delayed, but I wanted to walk through my take on COOP’s Q2 results. I first recommended COOP at $9.01 when the 10 year UST was 2.39%… I did not expect to be at 1.48% today! With that said, I’ve always argued that COOP was much less rate sensitive than investors appreciated, and I think the Q2 results validated this. That doesn’t mean that it’s been a smooth ride, however, as the stock declined 24% from my initial recommendation before rebounding 44%, giving up those gains, and effectively ending up where it started. I did add […]

COOP: some quick thoughts on the stock

I don’t plan to frequently comment on short-term price movements in ideas that I’ve posted, but I wanted to provide a few quick thoughts on COOP following the 8-K this morning. COOP’s stock has been weak since my initial post and is down -20% thus far. This would be a large move for most stocks, but it’s less material for COOP given the (1) high operating leverage in this business, (2) high financial leverage, and (3) positive skew of outcomes (in my opinion). I don’t think much has changed on my thesis, but I did want to address recent macro […]

Mr. Cooper Group (COOP): An extremely mispriced call option

As a value investor, I generally try to find situations with easily understood business models, predictable results, and limited risk of capital impairment. Mr. Cooper Group (COOP) checks none of these boxes, so this will naturally be my first post! An 86 page investment presentation is included below. In my opinion, COOP represents a separate and potentially compelling opportunity set for value investors: options. This includes both (1) listed option instruments (call options, warrants) and (2) securities with call option-like characteristics (levered equities with small market caps relative to asset values). In either instance, there exists large upside if sentiment […]