Your Bull Market Alert portfolio continues its remarkable start to 2012. You now have four stock picks that boast double-digit percentage gains and four current option positions up over 50%. You have seven closed options in 2012 — each one profitable for an average gain of 67% — including one for 106%! The lowest option gain was 39%.
In this special Bull Market Alert, I want to highlight two new recommendations.
First, after last Friday’s sharp sell-off, Life Technologies Corporation (LIFE) has found its footing and already is bouncing nicely. So, I’m recommending that you re-enter a position in the options. Specifically, buy the May $50 calls (LIFE120519C00050000). This position should profit handsomely as LIFE resumes its upward trend toward its price target of $65.00.
Second, I want to make a totally new recommendation, Altisource Portfolio Solutions (ASPS), an “under-the-radar stock” that prominent alpha investors have been calling the “stock of the decade.”
Altisource provides mortgage-management services and related technology products for loan originators and loan servicers. Its offerings span the life cycle of a mortgage, but most of its business is default-related. The company’s business includes managing foreclosed properties and providing non-legal, administrative services to attorneys to support foreclosures and eviction functions. As you can imagine, Altisource’s business has been booming in recent years amid the high number of foreclosures and delinquencies in the U.S. housing market. While the mortgage services segment is Altisource’s biggest business, the company also provides credit card collections and customer-relationship management services.
Altisource’s clients include commercial banks and hedge funds. Its largest client is Ocwen Financial (OCN), which spun off Altisource back in 2009. Ocwen services mortgages with a focus on subprime residential markets. Altisource has an eight-year contract to provide Ocwen with a variety of services, which typically are outsourced to third parties such as asset management and closing services. Altisource also provides Ocwen with the technology platform it uses to service its residential and commercial loan portfolio.
Looking to the future, Altisource also recently acquired the Mortgage Partnership of America (MPA), the manager of Lenders One Mortgage Cooperative. Lenders One is an alliance of 169 mortgage bankers that originated close to $80 billion in mortgage loans in 2009, or roughly 4% of all U.S. originations. That means as the economy improves and the default rate reverts back to historical norms, Altisource will have the ability to develop a lot of products and services in the origination space and the ability to sell them to the members of Lenders One.
With strong demand for mortgage default services amid the high number of foreclosures and delinquencies, Altisource’s Q4 earnings per share jumped 44% to $1.02, blowing away expectations. Revenue grew 40% to $104.4 million. And with a very large backlog of delinquent loans where foreclosure has yet to begin, there is plenty of upside in Altisource stock. The stock closed yesterday at $62.48. But I think the stock could trade as high as $100 within the next 12 months.
So, buy Altisource Portfolio Solutions (ASPS) at market today and place your stop at $52.00. I’m going to hold off on recommending options on ASPS today. The stock has jumped quite a bit in the last few days and the options currently are overpriced. So, I’ll be recommending options on this dynamic play once the stock takes a breather.
P.S. Please join me for the Las Vegas Money Show, May 14-17, at Caesar’s Palace. To register, call 1-800/970-4355 and mention priority code 026655 or go to NicholasVardy.lasvegasmoneyshow.com. I also encourage you to sign up for my hedge fund seminar, Wednesday, May 16, 9 a.m. – 11 a.m.
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