Update: IndyMac (IMB)

Last Thursday we talked about IndyMac Bancorp (IMB) as a good opportunity play. The stock had a value of $31.44.

Today IndyMac Bancorp (IMB) closed at 35.09, up by $2.32 or 7.1% on news (that has no direct relation to the company) that iStar Financial Inc. said it would buy the commercial real-estate lending business of Fremont General Corp (FMT) for $1.9 billion in cash. The Fremont stock closed at $10.00, up by $2.89 or 40.65%.

Fremont shares had lost more than 60% of their value earlier this year. At the beginning of 2007, Fremont was one of the largest subprime mortgage lenders, offering home loans to poorer borrowers with bad credit records. But later the crisis in mortgage market hit hard the company hard. In April, it agreed to sell the subprime business to hedge fund Ellington Capital Management. Now Fremont is also selling its other main business - commercial real estate lending - leaving only its retail banking unit.

As we described in our last thursday's posting, the fear about IndyMac's mortgage business is already priced in the stock's value. This not-so-related news is good because it pushed IndyMac's stock value up but today's enthusiasm may fizzle out in next few days.

But we are not taking these short term fluctuations too seriously. We believe in holding it for a longer time for better gain, while enjoying its high dividend yield (currently, 5.70%). If you had bought IMB at last Thursday's closing price, the gain is already 11.60% -- that gives you a good profit in less than a week's time!

Disclosure: We own IndyMac in our personal portfolio. You should do your own research before making any decisions. This blog, or its authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.
Caution: Always purchase stock depending on the risk level you can take. Keep your portfolio diversified and never ever put all or most of your money in one basket. Spread your risk in various kinds of investments: real estate, fixed income, bond, stocks in various sectors. If you feel individual stocks are too risky for you, consider ETFs or mutual funds.