After the recent pounding that the subprime mortgage sector has been taking, you're probably not thinking about its investment opportunities. But that's what I'll be talking about on CNBC at 11 a.m. with Becky Quick and Tom Gardner of Motley Fool.

There are two reasons for thinking there might be opportunities here:

• Investment banking put - Investment banks are putting a floor under the stock price of many subprime lenders. For example, Goldman Sachs Group Inc. (NYSE: GS), Lehman Brothers Holdings, Inc. (NYSE: LEH) and Bear Stearns Companies, Inc. (NYSE: BSC) have all said they may commit more funds to subprime. Yesterday, Accredited Home Lenders Holding Co. (NYSE: LEND) added $3.39, or 56%, to $9.43, helped by apparent takeover speculation in the wake of its statement Tuesday that it would explore "strategic options." On the pink sheets, New Century Financial rose 68 cents to $1.35, more than doubling its share price from a day earlier. NovaStar Financial Inc. (NYSE: NFI) is also up 50% since it bottomed out at $3.43 on Tuesday.
• Picking the long term survivors - Not every industry participant will be wiped out. For example, Countrywide Financial Corp. (NYSE: CFC) -- which only has 7% of its loans in subprime -- added $376 million in cash for a total of $1.4 billion in 2006. Nevertheless, it is far from being out of the woods: it recently reported a rise in bad loans across the board -- i.e., payments were 30 days late at the end of 2006 on 2.9% of prime home-equity loans serviced by CFC, up from 1.6% a year earlier and payments were late on 19% of subprime mortgage loans [subscription required], up from 15.2% at the end of 2005. If it reports worse than expected damage in future quarters, CFC will drop further, which could represent buying opportunities that lower an investor's cost basis. Despite the medium term pain of such a strategy, if CFC survives until the next housing upturn, investors will profit.

Continue reading Subprime investment opportunities?

Subprime investment opportunities? originally appeared on BloggingStocks on Fri, 16 Mar 2007 10:00:00 EST. Please see our terms for use of feeds.