November 5, 2014

Doug Kass on Ocwen and ASPS

(On Ocwen and ASPS) -- The circumstances of the last few months have created an attractive reward vs. risk on both stocks for those that are willing to assume continued headline risk. Both companies trade at only approximately 8x earnings.

-I expect Ocwen to trade in a range of between $17 and $30 over the next 12 months. 
-For ASPS I expect a range of between $65 and $95 (at only 10x FY 2016 forecasts).

I anticipate a manageable settlement with the DFS to be announced sometime over the next few months. At that time, the shares of Ocwen and its related companies will likely spike higher, depending on the size and restrictions of the settlement. I expect the likely settlement to be reasonable and less than the market appears to currently anticipate. I also believe that Ocwen might still be allowed to grow through further acquisitions, but perhaps with some restrictions.

Altisource's shares have fallen by $100 a share (from $170) since early December 2013 and Ocwen's shares have dropped by $38 (from $57) since the beginning of this year.

I have reestablished a long in Altisource Tuesday (I am working as a scale buyer under $71) and I have added to my Ocwen long under $19.

Position: Long OCN, ASPS