Why I’m Still Holding on to CapitalSource
January 6, 2010 by Seeking Alpha
Filed under Investment Ideas
Original Article from Seeking Alpha Editor’s Pick
Dan Wieman submits:
I continue to hold CapitalSource (CSE) because I believe it will recover very quickly as the economy improves. However, this is a company in transition, and with each news release it is as if the company is completely new. I’m often tempted to sell simply based on how complicated it is. My four part series took a close look at this company, and I thought it would be useful to take another look after its third quarter earnings and other recent announcements.
CapitalSource Bank
When all is said and done, this will be the business that remains. It will be the funding source for CapitalSource’s lending going forward. For the quarter, CapitalSource Bank reported a net loss of $15.1 million, largely due to increased provision expense of $48.5 million. These provisions should decline in the coming year, which will result in quarterly income of around $33 million. That’s $132 million annually, just from CapitalSource Bank. At 15x earnings, that’s a market cap of about $2 billion. As of this writing, the whole of CapitalSource has a market cap of $1.35 billion.
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