Walter Investments (WAC) is in the business of mortgage servicing, or dealing with mortgages the traditional banks don’t have the time or inclination to handle. It’s a lucrative trade, and has served Walter and compatriot Ocwen (OCN) well in the wake of the 2008 housing meltdown. However, the companies’ stock run-up has not been without its bumps as of late, with both facing sweeping investigations from regulators for violating consumer finance law.
Despite facing massive sanctions form the likes of the Federal Trade Commission, and reeling from a disappointing fourth quarter earnings report, Walter Investments separated itself with positive movement in its stock. Walter Investments started March 6 off with a bang, notching a sizable gain and correcting the losses experienced over the beginning of 2014.
Walter Investments’ rebound began at the beginning of the week, but really took off on Thursday, with the company’s shares popping 7.73 percent by midday on triple the normal volume.
The pop appears to have no basis, as the company has received scant good news as of late. In addition to the FTC investigation that alleges the company violated almost every conceivable consumer finance law, this week Walter Investment was slapped with downgrades from two analysts. On Mar 5 Zack’s lowered the company from neutral to underperform, and Compass Point slashed their price target from $35 to $28 a share. The company was also chastised by Moody’s for attempting to get into the nonprime mortgage business, who also threatened to lower Walter Investments’ credit rating.
Though is faces regulator's fines and a possible creidt downgrade, Walter Investments still possesses stellar fundamentals. The company sports a P/E under five, and a forward P/E just above 4.
By 3 PM EST shares of Walter were trading at $29.01 a share, which is the highest they’ve been since the beginning of February.