Margaretten Financial Corporation's announcement last Friday of provisions for $60 million of purchased servicing losses met with surprising results Monday.

The stock rose, trading up as much as a point, at 14 1/2 in early trading.

"I thought bad news made stocks go down," said Gareth Plank, an analyst at Mabon Securities who has had a "sell" rating on Margaretten since mid-August.

Coupled with Stock Buyback

Most observers think that securities buyers were encouraged by Margaretten's move to twin the loss announcement with a two million-share, stock-buyback program and a $40 million issuance of preferred shares.

"Margaretten is caught between the ratings agencies, which want to see them build capital, and investors, who want to see share prices rise," said Mr. Plank, "this move takes care of both. Investors like the buyback, and the agencies like the preferred issuance."

The stock-purchase program is large, accounting for 13% of all outstanding shares. And it comes on top of a employee-benefits program that will buy another 200,000 shares.

Recommendation's Impact

Margaretten's stock probably also was helped by a Monday morning "buy" recommendation by influential Alex. Brown & Co. mortgage banking analyst Sy Jacobs, who praised the company's move to write down purchase servicing.

Margaretten, as one might expect, sees its stock as a better buy than alternative mortgage banking investments. "We've observed a spirited and buoyant market for mortgage banking assets and we didn't want to participate, so rather than buy there we decided to invest in ourselves," said Felix M. Beck, chairman of Margaretten.

Mr. Beck stressed that the company has sufficient cash on hand to buy the shares even without the planned issuance of preferred.

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