Category Archives: Warren Buffett Stocks

Mortgage Markets in Transition

Housing stocks got a boost on Wednesday following the announcement from the Federal Open Market Committee (FOMC) that the Federal Reserve would continue its $85 billion monthly asset purchases. That total includes $40 billion in purchases of mortgage-backed securities.

The FOMC’s reasoning was spelled out in the meeting announcement:

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate.

The mortgage markets have slowed over the past several months as mortgage interest rates increased. Refinancings have dropped to around 60% of all new mortgages and could drop to around 36% next year. Lending for new purchases will make up only a portion of the decline.

According to its September MarketPulse newsletter, CoreLogic Inc. (NYSE: CLGX) thinks the housing market needs to transition from a lending-rate driven model to a home value-driven model if there is to be a sound mortgage market in the future. Factors that will affect that transition include low long-term estimates for U.S. GDP growth of just 1.75%, higher mortgage rates slowing the pace of new housing construction, the impact of new lending requirements and a reduction in the number of all-cash sales.

CoreLogic notes:

The housing sector has played a pivotal role in driving GDP growth since late 2011, but rising rates will modestly temper the contribution going forward. Nonetheless, rising rated do not pose a burden that is insurmountable.

The housing sector contributed 17% to first-quarter 2013 GDP growth. That cannot contract much if the U.S. economy is going to recover. The Fed knows that, which is a big reason that a tapering of asset purchases has been delayed.

Apple Seals iPhone Deal With Japanese Carrier (AAPL)

With a new iPhone device on the horizon, Apple (AAPL) has announced a new deal that will bring the famed mobile device to Japan.

Japan’s NTT DoCoMo will begin carrying the iPhone starting this fall as the firm looks to increase its number of contracts and deliver the long-awaited device to its customers. The deal comes just ahead of the September 10th meeting where Apple will release the details on its latest iPhone model.

On a macro scale, Apple has been trying to expand its reach into global markets for some time now, as the popularity of the iPhone has transcended U.S. borders. This move comes in a long line of others that look to make the tech giant a more global force.

Apple shares were down $3.42, or .69%, at Thursday’s close. The stock is down just over 7% this year.

Sterne Agee Maintains “Buy” Rating on Las Vegas Sands; Expects Dividend Increase (LVS)

Sterne Agee announced on Monday that it has maintained a “Buy” rating on resort company Las Vegas Sands Corp. (LVS).

The firm has reaffirmed a “Buy” rating and $67 price target on LVS. This price target suggests a 12% upside from the stock’s current price of $59.24.

Sterne Agee analyst David Bain commented: “Based on July and August data channel checks and our September forecast, we believe LVS’ Macau division is trending8% to 10% above the Street’s 3Q13 estimate of ~$670m.”

“Before the end of the year, we believe LVS regular dividend will be increased to $1.60+ per annum from $1.40,” he said. “Further, LVS leverage should be ~1.4x by 4Q13 – underutilized, in our view. At that time, 1 additional turn of leverage could add over $4.6b in cash that could be returned to investors in the form of more significant buybacks or a one-time dividend,” the analyst added.

Las Vegas Sands shares were up 46 cents, or 0.78%, during pre-market trading Monday. The stock is up 28% YTD.