Stock pickers have had a hard time in dealing with the five largest mortgage companies to go public since the beginning of last year.
Strong movement, both up and down, has been characteristic of the group, whose members are Plaza Home Mortgage Corp., Margaretten & Co., American Residential Mortgage Corp., North American Mortgage Co., and Fleet Mortgage Group Inc.
The stocks of the five, all of which went public between January and October 1992, are trading at least 20% above or below their initial offering prices.
Margaretten Was First
Much of the stocks' fate has been ruled by interest rate movements and the perceptions, or misperceptions, of the investment community.
Margaretten, based in Perth Amboy, N.J., was the first of the five to go public. It was offered for $20 a share on Jan. 29, 1992.
The shares came to market at a time of great enthusiasm for mortgage stocks, says Gareth Plank, an analyst at Mabon Securities Corp. "There was refinancing fever and Countrywide Funding Corp., at the time the only publicly traded mortgage stock, was red hot." The stock has never exceeded its offering price of $20 and rests today at about $14.50.
NationsBanc Deal Cited
Several analysts, including Peter Treadway of Smith Barney, believe that Margaretten has suffered from its decision to buy NationsBanc Mortgage Co. of Virginia from NationsBank.
Though Bruce W. Harting of Salomon Brothers believes the move has positive long-term implications, most agree Margaretten bought servicing at close to the top of the market.
Ironically, the poor performance of Margaretten's stock may have contributed to the success of some of the other mortgage offerings.
|Very Attractive Valuation'
"Margaretten laid the foundation for North American Mortgage to come out at a very, very attractive valuation," said Mr. Plank. That initial offering, on July 8, 1992, was at $11.50 a share. The stock now trades at around $27.
The company has exceeded most analyst estimatates.
Next out of the gate was Fleet Mortgage Group, offered for $23 a share on July 31, 1992.
According to Mr. Jacobs, Fleet went for a high price because, "the bond market had rallied like mad all through August and Wall Street thinks that low rates are good for mortgage companies."
Hurt by Heavy Prepayments
But lower rates proved to be poison for Fleet because of heavy prepayments.
Fleet Mortgage's stock, which trades at around $17.25, also suffered from recent changes in the way the company accounts for excess servicing rights.
American Residential Mortgage, first offered on Aug. 14, 1992, at $13 a share, has performed well, trading now at around $20 a share.
Mr. Jacobs thinks that the company's balance between originations and servicing has put it in good stead for a variety of interest rate environments.
Plaza Home Mortgage Corporation, of Santa Ana, Calif., the last of the five to go public, is smallest in terms of market capitalization. Its stock, first offered at $6.50 a share on Oct. 2, is now trading at around $9.
Mr. Plank relates Plaza's low offering price to the fact that it came to market when it appeared interest rates might rise.