Financial Buybacks

09/28/2015 7:00 am EST

Focus: STOCKS

David Fried

Editor, The Buyback Letter

David Fried is an industry-leading expert on buybacks and share repurchase programs. Here, the editor of The Buyback Letter reviews two financial stocks recently added to his buyback model portfolio.

Headquartered in Purchase, NY, MBIA Inc. (MBI) is a bond insurer, which insures municipal debt, providing credit protection and market access. We last bought MBIA in June and it's back at the top of our filters. 

MBIA was formed in 1973 by four major insurance companies. A year later it became the first municipal bond guarantor to receive S&P’s highest AAA credit rating.

Year-to-date combined operating income for the six months ended June 30, 2015, was $53 million ($0.30 per diluted share) compared with $42 million ($0.22 per diluted share) for a similar period in 2014.

In 2015 to date, the company and its subsidiaries repurchased 23.4 million shares at a total cost of $197 million. It repurchased 3.3 million of its common shares during 2014.

In late July the company authorized up to $100 million in shares under a new repurchase authorization. It has reduced shares outstanding by 6.98% in the past 12 months.

Ocwen Financial (OCN) is a financial services holding company, which—through subsidiaries—services and originates mortgage loans.

Q2 results included weaker earnings than expected (revenue fell 16%, to $463 million and net income was $10 million, down by 85% from last year's net income).

President and CEO Ron Faris noted that the company's asset-sale strategy resulted in the sale of $3 billion of non-performing servicing assets.

In addition, the company cut its debt by about a quarter-billion dollars and got strong support from the financing market for a refinancing operation during the quarter.

The company said it hopes to cut expenses by more than $150 million without sacrificing quality service to borrowers.

We bought OCN earlier this year and sold it in July. We are again adding the stock to our portfolio. Ocwen reduced shares outstanding by 7.3% in the past 12 months.

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