Rationale Research

Assured Guaranty Ltd. (General Comments)

2007-12-29T10:16:00.000-05:00

Please use the comments section of this entry for general discussion of Assured Guanranty, ticker symbol AGO.

Company website: http://www.assuredguaranty.com/

Assured Guaranty Ltd. (Report # 441299001)

2007-12-29T09:05:00.000-05:00

Assured Guaranty Ltd. (Ticker: AGO, $26.01 as of 12/28/07 close)

Author: Accrued Interest

Position: Long

Submitted: December 29, 2007 (Saturday) on the author's website

You're wrong, Assured Guaranty. You have that power too.

Berkshire Hathaway is starting its own municipal bond insurer, Berkshire Hathaway Assurance Corp. There are three questions. First, what impact will this have on the muni market? Second, what impact will this have on other monoline insurers? And third, what will muni guys call the new insurer? BHAC? (Pronounced like Be Hock? Maybe the old Oracle should have thought about that a bit more).

The answer to the first question is that its great news. See below.

The answer to the second question is that its great news for some and terrible news for others. Remember that it was often speculated that Berkshire could be a source of capital for the likes of AMBAC, MBIA or FGIC. I myself wrote the following in November:

Berkshire Hathaway has expressed interest in the muni insurance business. I'm sure that if Berkshire put, say, $1 billion into AMBAC, then AMBAC could subsequently do a couple preferred offerings. They'd be expensive, but with Warren Buffett already on board, I think they could get it sold.

Now Buffet won't be on board, so you can forget all that. Its possible BHAC sells some reinsurance to existing muni bond insurers, but that won't inspire confidence in the overall concern like a direct investment would have. I'd therefore put the odds of an eventual downgrade of FGIC as very high, AMBAC and MBIA as moderate. S&P and Moody's are currently satisfied with both MBIA and AMBAC's capital position, which means that any downgrade of these two is likely 6-12 months away if it happens. I believe both MBIA and AMBAC will need more capital, so the moderate odds of a downgrade is based on the odds of them raising more capital. FGIC on the other hand needs capital pronto and I don't know where its going to come from.

I'm skeptical that any of these three can remain a going concern without a AAA rating. I'd suspect they go into runoff. MBIA stock was down nearly 16% today, AMBAC down nearly 14%.

Meanwhile, Assured Guaranty was also lower today by about 4%. The market is reading the Buffett news all wrong by punishing AGO. See, AGO is kind of like the C3-PO of bond insurance. Not especially better than the next protocol droid, but happened to get stolen by the right Jawas at the right time. Now AGO is right in the middle of saving the entire galaxy from the Evil CDO Empire! I guess Buffett is kind of like Luke in this metaphor? Or maybe Obi Wan? I digress.

AGO has benefited from a ton of free press in the last 6 months. As problems with the larger, more established MBIA, FGIC, and AMBAC became apparent, both the ratings agencies and Street firms starting publishing regular reports on all bond insurers. This thrust little Assured into the mainstream consciousness. Suddenly the "reputation" barrier to entry in the municipal insurance business had been smashed into who knows what.

The only risk AGO stock holders face is the possibility that municipal bond insurance declines as a concept. That bond buyers are no longer willing to pay for extra protection on AA-rated school districts and A-rated sewer systems. The fact is that the history of defaults on these types of credits is slim indeed, which is exactly why the municipal insurance business is so profitable. Classically, muni buyers liked insurance because it prevented them from having to do any credit research. So the question is, will investor laziness trump the fear created by current insurer troubles?

I believe the entry of Buffet's firm solidifies the laziness argument. Now municipal buyers can say that we have three solid insurers without any significant structured finance holdings: FSA, AGO, and now BHAC. That's enough insurers to diversify a portfolio reasonably. We can also dismiss FGIC and whomever else winds up going down as insurers who made bad decisions. Not that insurance is a bad business or a bad concept.

I've been around the muni market long enough to know that these people like the status quo. Even more so that other markets. They want to believe in insurance. They want to keep buying insured bonds without thinking about it. They won't need a lot of convincing that throwing FSA and AGO out with the FGIC bathwater is a bad idea. Its what they want to believe anyway.

So back to AGO stock. Its really the best pure-play muni insurer going. Current its trading around 1.1x book. MBIA and AMBAC had been trading more like 1.3x prior to the credit crunch. But that's not the real reason to own AGO. Assured is going to rapidly rise from also-ran to major player in municipal bond insurance. Municipal issuance is going through a bit of a lull here, but after the new year, we're going to see muni issuance ramp back up. Issuers are going to be looking for insurance, and they ain't going to be calling MBIA. Assured, FSA and Berkshire are going to dominate municipal insurance in 2008. This should allow Assured to grow their book value just as fast as they can get capital to grow it. This will also create improved pricing power, which is the reason Buffett gave for making an entry into the muni market. So you may argue that AGO should trade at a higher multiple of book value than MBI or ABK did in years past.

AGO's stock may be rocky, especially if any of the problem 3 wind up in run-off in 2008. But still, as a long-term investor, I'd be happy to ride that out. AGO has a great model and a great opportunity. In time, they will learn to use this power. And I want to be in on the ride.

Kraft Foods Inc. (General Comments)

2007-12-27T15:49:00.000-05:00

Please use the comment section of this post for general coversation about Kraft Foods, Inc. (KFT).

Company web address: http://www.kraft.com/About

Kraft Foods Inc. (Report #847646001)

2007-12-27T15:12:00.000-05:00

Kraft Foods Inc. (Ticker: KFT, Last Price $33.52 as of 12/26 close)

Author: Royod

Position: Choose not to purchase

Submitted: December 27, 2007 (during market)

It Ain’t Easy Being Cheesy!

Kraft is quite possibly the most boring large cap stock going. The fine purveyor of all things cheese as well as various other food staples holds a commanding market position in many of its products. Yet still has little in the way of pricing power and is mostly a slave to changing input prices. The company has a stated desire to retool, focusing on higher margin products. This sounds fine and good, but its unknown whether they’ll be able to pull it off. Other than divestures or acquisitions, there is no reason to expect sales to either grow or decline rapidly, because everybody’s gotta eat. So given the slow growth, uninteresting dividend yield (around 3%), and unexciting margins, you’ve got to wonder why this stock should trade at 18x forward earnings.

Look, companies like Kraft are what they are. They buy inputs at x, process and combine, then sell a finished good for y. They introduce new products and retire old ones, but they are in a highly price competitive market: consumer groceries. They will therefore forever struggle to generate impressive top-line growth. Some years they hit, some years they don’t.

The following table is from Merrill Lynch, and shows sales growth by unit. The range of year-over-year change was between +11% and -9%. Note also that the overall sales increase was a meager 2%, and was due entirely to changes in pricing. There was no net increase in volume.

For me, that’s not a story for which I’m willing to pay 18x forward earnings. Here is the history of Kraft’s P/E ratio from 2003 to today. I start in 2003 to eliminate noise from the 2000-2002 bear market.
Given that the current P/E is right on the average of the last several years, at best Kraft is fairly valued. In fact, I’d argue that Kraft has been the beneficiary of portfolio managers rotating out of financial shares and into companies like Kraft. If the situation in financials gets worse, there could be an overall re-rating of valuation ratios lower generally. If the financial picture rebounds in 2008, Kraft will likely be left behind.

Brokerage analysts are bored by Kraft too. According to Bloomberg, 12 of 20 analysts that follow the stock rate it as a “hold” or equivilant. There are 7 buys and 1 sell.

Overall, I looked at this stock because I thought it might be nice defensive play. I also thought that a weaker dollar and rising food prices would help the company. Maybe so, but the valuation is just too high to make it worth my while.

SLM Corporation (General Comments)

2007-12-26T14:46:00.000-05:00

Please use the comment section of this post for general coversation about SLM Corp(SLM).

Company web address: http://www.salliemae.com

SLM Corporation (Report #703810001)

2007-12-26T13:23:00.000-05:00

SLM Corporation (Ticker: SLM, last price $22.06 as of 12/24/07 close)

Author: Anonymous market professional

Position: Choose not to purchase

Submitted: December 26, 2007 (during market)

Sallie Mae Capital Needs Cloud Horizon
Summary
The merger with J.C. Flowers’ private equity group has completely fallen apart. Meanwhile, both market and legal conditions have changed dramatically since the deal was struck, leaving Sallie Mae in a materially different operating position than before. The company stands at a cross-road. The student loan business remains perfectly viable, especially for lenders holding loans on their books. It is a business which benefits from scale, which works in Sallie’s favor given their market leading position.

However, return on equity for Federally guaranteed loans will decline due to legislative and market changes. On top of the decrease in subsidies, which has been widely reported, securitizing student loans, while still possible, is more expensive than in the past. In addition, the sharp decline in SLM stock will force the company to renegotiate or otherwise deal with forward equity contracts which are now well underwater. While it seems that Sallie has the resources to deal with this, it is likely going to be significantly dilutive. Finally, SLM probably needs to move toward an “A” bond rating to ensure adequate liquidity and to reduce interest expense.

SLM on its own again
As an independent firm, SLM’s core business model remains in tact, although ROE will be compressed by legislative changes. The key elements to the College Cost Reduction and Access Act of 2007 legislation are as follows (from SLM’s 3rd quarter 10Q)

Reduces special allowance payments to for-profit lenders and not-for-profit lenders for both Stafford and Consolidation Loans disbursed after October 2, 2007 by 0.55 percentage points and 0.40 percentage points, respectively
Reduces special allowance payments to for-profit lenders and not-for-profit lenders for PLUS loans by 0.85 percentage points and 0.70 percentage points, respectively
For loans first disbursed after October 1, 2012, reduces default insurance to 95 percent of the unpaid principal of such loans
Eliminates Exceptional Performer designation (and the monetary benefit associated with it) effective October 1, 2007
Reduces default collections retention by guaranty agencies from 23 percent to 16 percent
Reduces the guaranty agency account maintenance fee from 0.10 percent to 0.06 percent

The Exceptional Performer designation allowed Sallie Mae to receive a 99% recovery on any defaulted loan. With that program being eliminated, SLM will be subject to 3% risk sharing. Probably the most important element is the reduction of payments on Stafford and PLUS loans. This will obviously impact SLM’s bottom line.

We agree with the company that the direct impact of the payment reduction will be mitigated by reduced competition over time. Many lesser players in the student loan market will be squeezed out by the reduced payments. SLM may indeed become an acquirer of smaller student loan originators. Given that the student loan business enjoys strong economies of scale, SLM’s ROE would improve with more market share.

Capital Requirements to Weigh on Shares
SLM faces significant capital needs:

We expect the company to hold more capital against government-backed loans.
The company has a stated desire to earn an “A” level rating, which will require better capital ratios than current. We believe improving their credit rating will be key to continued profitability.
The company has equity forward contracts which are well under water. The company is already renegotiating these contracts to avoid hitting triggers. According to Lehman Brothers analyst Bruce Harting, canceling the equity forwards will probably cost around $1.4 billion.

Because SLM’s loan portfolio remains solid (88% of SLM’s loan portfolio is FFELP and therefore carry a 97% Federal guarantee), we expect SLM will have little trouble raising capital. Recent equity infusions to more troubled financial institutions such as MBIA reinforce this notion. However, we believe in order to achieve all three of the capital goals mentioned above, we estimate the company would have to raise between $2 and $2.5 billion. That vs. book value currently of $4.4 billion.

The company is currently trading at about 2x book value. If we estimate that book value would be impaired by $2 billion, the current share price would indicate a price/book ratio of 3.7x. While SLM has traded at much higher P/B ratios in the past, we would not expect SLM to trade higher than 3x book for the foreseeable future, given the reduced ROE and increased default risk within their portfolio.

We therefore choose not to buy the stock.

Note on SLM’s Future as an Independent
We believe the company will most likely seek a merger with a larger financial institution. Bank of America and J.P. Morgan had participated as minority partners in the original J.C. Flowers deal. Naturally one might think that either of these two banks could emerge as strategic buyers of Sallie Mae. However, given current conditions, we believe most banks are more focused on preserving capital and/or improving their balance sheets. Banks with adequate capacity to make a strategic purchase in today’s market are most likely looking for more deeply discounted assets than SLM’s shares are currently. We see SLM remaining independent for the next 1-2 years, with a merger likely with a strategic buyer at some point after credit conditions overall improve.

Given the long time frame and highly uncertain price which a sale might fetch, we view the prospect of a merger in the future as a minor positive for stock price. It was not enough for us to alter our investment decision.

iStar Financial (General Comments)

2007-12-19T17:06:00.000-05:00

Please use the comment section of this post for general coversation about iStar Financial (SFI).

Company web address: http://www.istarfinancial.com

iStar Financial (Report #212930001)

2007-12-19T16:55:00.000-05:00

iStar Financial (Ticker: SFI, last price $26.82 as of 12/19/07 close)

Author: Anonymous

Position: Long

Submitted: December 19, 2007 (during market)

iStar Financial: Risk is in commercial real estate market, reward is a 12% dividend.

Business Summary
iStar Financial is Real Estate Investment Trust (REIT). Their primary business is senior and mezzanine commercial real estate loans, held for investment. Their portfolio is diversified across various property types and geographical locations.

The Problems
While iStar's commercial real estate business is well removed from the sub-prime lending problems which have dominated markets in 2007, it has not escaped the contagion. The stock has fallen 44% year-to-date, and is currently trading near its 52 week low of $25.25.

The company faces two primary challenges. Most obvious and more serious is the health of the commercial real estate (CRE) market. Commercial real estate has been very hot in recent years, drawing parallels to residential real estate. Should commercial real estate falter, it is feared that commercial real estate lenders will suffer the same fate in 2008 as residential lenders did in 2007.

Second is availability and cost of capital. The markets have rapidly moved from too much liquidity to not enough, and cost of debt capital to a company like iStar is reflecting this.

Health of Commercial Real Estate
Commercial real estate is currently quite healthy. According to the National Council of Real Estate Investment Fiduciaries, the current vacancy rate across all commercial property types is below 8%, vs. a 20-year average of just above 9%. Also according to the NCREIF, the total return on real estate properties is likely to be above 10% in 2007, the fourth double-digit performance year in a row.

A major question mark is capital markets. Should access to capital become more constrained and remain constrained for an extended period, this could certainly impact CRE values. Furthermore, it is possible that during a period of economic weakness, it is possible that commercial real estate valuations fall, possibly increasing loss rates.

The parallels to residential real estate are obvious. In both cases, the market had been very hot owing in no small part to easy financing. In both cases, a liquidity crunch is threatening to rapidly reverse the upward trend.

We believe that CRE lenders were more conservative at the peak than residential real estate lenders. First of all, some residential real estate lenders (or investors in residential mortgage bonds) began to believe that home prices would never fall, and that recovery on home foreclosures would always been very high. Commercial real estate has exhibited much more historical variance, and therefore commercial lenders were not as sanguine. Its certainly possible that CRE credit standards were more lax in the last couple years compared with historical norm, and declining subordination levels in commercial mortgage-backed securities is good evidence of this. However, there is no parallel to the “no documentation” or “liar loans” made in the residential market.

Commercial lenders also have much more control over the lending process compared with residential lending. Residential lending is a commodity business. In order to make money, you have to do large volumes of small loans. Commercial lenders have the advantage of smaller numbers of loans, each of which are large, but can be actively managed.

This gives an advantage to an experienced lender like iStar. Specifically, iStar has a very diverse portfolio of property types and geographical exposures. Its unlikely that weakness in just one area of commercial real estate would be enough to substantially impair iStar's capital. iStar's average loan-to-value is 66%, according to the company.

Access to Capital
A lender like iStar operates on a spread between its borrowing costs and its assets. Hence when borrowing costs are rising, this creates a challenge for iStar. The company has $2.6 billion in debt coming due in 2008, but expects $5 billion in principal receipts from loans coming due. This should allow the company to avoid having to sell debt in an expensive market.

Ironically, the company has complained that CRE CDOs and other vehicles providing capital to for commercial real estate have been underwriting questionable deals. The company had expected to thrive in a more difficult credit environment. The company still believes they can profit from quality real estate projects in need of liquidity at a time when liquidity is dear. However, given that iStar themselves will be facing a difficult market in which to raise capital, the credit crunch may not be as much a boon as was once suspected.

The Benefits
As with any REIT, the primary source of performance is dividend payments. iStar declared an $0.87 quarterly dividend on December 5, implying an annual dividend of $3.48 per share. Using the December 19 closing price of $26.82, that is a 13% dividend yield.

It is worth noting that the historical average dividend yield (2000-2007) is 8.11%. Given the current dividend and an 8.11% dividend yield, the share price would be $42.91, or 60% higher than its current price.

The Catalyst
Unfortunately, given the environment there is no obvious catalyst for a reversion to more typical dividend yields. Risk aversion, particularly in regards to finance, is very high and likely to normalize at some point in the future. But realistically, this isn't likely to occur in the very near future.

The sub-prime residential lending problem has turned up in some surprising spots. Few predicted the wide array of firms and/or investment types which would be hit by the contagion. This has market participants fearful that related problems could crop up anywhere. Companies are therefore in the position of proving a negative. Its impossible for iStar or any other company to prove that sub-prime or related contagion will not cause problems for them. Therefore it would seem that iStar's stock price may be depressed until the current credit crunch begins to abate. This could obviously take a year or more.

However, I decided to go long iStar now, due to the attractive dividend yield. I am loathe to try to time catalysts for stock price appreciation. While I expect the credit crunch to remain with us for all of 2008 and possibly further, I believe that the 13% dividend yield offered by iStar is a worth while IRR with relatively low risk. If credit problems abate faster than I've anticipated, the stock should appreciation substantially.

Radian Group, Inc. (Report #215231001)

2007-12-15T13:04:00.000-05:00

Radian Group, Inc. (Ticker: RDN, last price $10.62 as of 12/14/07 close)

Author: Anonymous

Position: Long

Submitted: December 14, 2007 (after market)

Radian is a specialty insurance company with two major business lines: traditional mortgage insurance and bond insurance. Radian provides both direct insurance and reinsurance in these areas.

Radian’s stock has been hit extremely hard during 2007, down 84% from a high of $67.35 on February 6. There are two major reasons for this. First, Radian had agreed to merge with another mortgage insurer, MGIC, but turmoil in the mortgage market caused the merger to fall apart. Second, and more importantly, Radian’s two lines of business are both directly involved in the current sub-prime mess.

As of 3Q 2007, Radian had a book value of $3.4 billion, or $42.86 per share. At $11.05, the stock is trading at a 74% discount to book. While Radian obviously faces some serious challenges in coming quarters, this giant discount to book value is unwarranted.

There are two major reasons why a company would trade at a large discount to book that apply to Radian. First is that the market believes that the book value isn’t correctly estimated. For a financial company, this would typically be because there are impaired assets on the books that haven’t been written down, or at least not written down enough. Second is that the market believes shareholders are likely to be diluted by a need to raise new capital. We have seen several other mortgage-related financials raise large amounts of new capital recently in response to either regulatory or ratings agency pressure.

Both the expectation of future losses as well as the shareholder dilution situation apply to Radian, or at least could potentially apply to Radian. However, I believe an examination of potential losses indicates that losses are unlikely to be large enough to justify the current share price. In addition, Radian is unlikely to need to raise new capital, particularly common equity.

According to the company, Radian’s insurance portfolio as of 9/30/07 breaks down as follows (in either billions of dollars or percentage of total par insured).

Direct/Indirect Public Finance: $59.8, 38.4%
Direct/Indirect Structured Finance: $53.0, 34.0%
Total Financial Guarantee: $112.8, 72.4%

Prime Mortgage Insurance (MI): $20.1, 13.4%
Sub-Prime MI: $8.5, 5.5%
Pool MI: $3.0, 1.9%
Second Liens: $1.0, 0.6%
NIMs: $0.7, 0.5%
International MI: $8.6, 5.5%
Other: $0.2, 0.1%
Total Mortgage Insurance: $42.9, 27.6%

Examining the likelihood of loses in this environment is extremely difficult. On one hand, the economy is experiencing the after effects of a massive overindulgence in mortgage lending. Many analysts, myself included, believe there will be significant price erosion in the housing market in coming quarters.

On the other hand, efforts by the Federal Reserve and other government officials will undoubtedly alter the foreclosure rate by some degree. At worst, programs like the Hope Now Alliance will at least delay foreclosure, which should spread Radian’s MI losses out over time, which will ultimately be less taxing on their capital.

Despite the difficult environment, there is no particular reason to believe that Public Finance losses will be larger than usual for Radian. While Radian tends to insure BBB/Baa-rated municipal issuers, municipal default studies conducted by both Moody’s and S&P show no cyclicality to municipal defaults. These results were consistent even when looking solely at higher-risk municipal issuers, like private education or health care facilities.

In Structured Finance, Radian has limited exposure to residential mortgage-backed securities (RMBS), with only about 1.5% of total insured amount outstanding. Radian stopped writing insurance on RMBS in 2005, and on sub-prime RMBS in 2004, although they continued to take reinsurance contracts on such pools.

Radian’s primary exposure in Structured Finance is in corporate collateralized debt obligations (CDOs). These CDOs make up 30% of total insured. Corporate CDOs are pools of investment-grade credit-default swaps (CDS). Radian’s exposure is at the top of the CDO structure (rated AAA), which means that Radian typically has a substantial amount of notes subordinate to what’s being insured. According to Radian, these CDOs can suffer defaults of between 10% and 15% before Radian would pay any amounts under the insurance contract. According to Moody’s, the worst single-year default rate on corporate bonds from 1983-2007 was 3.8% in 2001, and the worst 5-year period was 13% for the period ending in 2003. Although no information was readily available about Radian’s CDOs, most corporate CDOs have a 5-year life.

Insurance contracts on CDOs are structured as pay-as-you-go CDS, which means that the insurer only pays bond holders for any lost principal and interest as it becomes due. There is no ability to “put” defaulted bonds back to Radian. If Radian can indeed suffer 10% defaults without paying any amount on its insured pools, then what would be owed given a 13% cumulative default rate over 5 years would be small.

Given Radian’s minimal exposure to residential mortgage loans in their Structured Finance portfolio, it is likely that losses from this unit would be consistent with historical norms. Even if corporate bond default rates rise significantly, Radian has enough subordination that losses from this area are likely to be small.

The bigger concern is in Radian’s traditional mortgage insurance business. It is our opinion, and probably that of most observers, that 2008-2010 may see more home foreclosures than any period since the Depression. Getting a good handle on exactly what percentage of homes may be foreclosed upon is difficult, given that a larger percentage of total loans originated in 2005-2007 were sub-prime than in past periods. In addition, a much higher percentage of loans were made based on stated income during this period, which are likely to default at a higher rate than historical norms. Therefore foreclosure rates during past recessionary periods will not be a good gauge.

Fortunately, an exact estimate of Radian’s losses is not necessary to suggest that the current book value discount is unwarranted. Instead, we can make an estimate of what kind of losses would justify the current stock price, then opine on whether that level of losses are reasonable.

First, we note that Radian currently has $1.095 billion in loss reserves, and is currently priced at a discount to book value of $2.594 billion. Therefore in order for book value to decline to the current stock price, the company would have to suffer $3.7 billion in losses with no offsetting new business.

According to Radian, their default rate on sub-prime MI is approximately 18%, Alt-A is 8% and prime is about 3%. Note that sub-prime defaults have increased markedly, from 3Q 2005 in sub-prime (was 14%) and Alt-A (was 6%) but not in prime.

Putting these default rates into Radian’s portfolio, and assuming 100% severity, we get $1.9 billion in losses from MI. This is almost exactly half the amount needed to justify Radian’s current book value discount. Hence if Radian’s defaults immediately doubled, that would justify its book value.

Of course, realistically, Radian’s losses would not occur all at once and in the mean time, they would write new business. Logically, mortgage insurance premiums are likely to rise in 2008, as underwriters are likely to value MI more in a weaker housing environment. In addition, underwriting standards overall are likely to improve in 2008 and onward, indicating that loss rates should improve for the 2008-2009 vintages compared with the 2006-2007 vintage.

So in order to actually justify Radian’s current price, MI losses would have to more than double. If we assume that most of the current losses in Radian’s portfolio are coming from 2005-2007 vintages, loss rates are likely to “burn out” at some point. It is logically impossible for loss rates to remain elevated in perpetuity. If we assume that half of all sub-prime loans from 2005-2007 will eventually default, and 18% has already defaulted, then we’d only expect 32% marginal losses going forward. If we stuffed all those losses into 2008, that would still be less than the loss rate required to justify Radian’s book value.

I conclude that Radian’s stock price is undervalued. I am long Radian stock.

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2007-12-14T22:23:00.000-05:00

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Radian Group, Inc. (General Comments)

2007-12-14T13:11:00.000-05:00

Please use the comment section of this post for general coversation about Radian Group, Inc.

Company web address: http://www.radian.biz/

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2007-12-14T10:39:00.000-05:00

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Authors must not have any inside information"
Authors may choose to post reports anonymously, with a handle, or with their real name. However, all authors must provide their real name to Rationale Research. If the author is a professional, the submission must also include title and name of firm.
Rationale Research reserves the right to make minor edits for clarity, organization, and formatting.

Tips for Writing Reports

Rationale Research does not presume to tell anyone how to value a stock. Your research report should reflect your investment process. A good way to start a report is to simply write the story of how you came to your conclusion.
Don't try to mimic the style of street research reports. For example, it isn't necessary to quantify a specific price target or EPS forecast if that isn't part of your normal investment process.
Use as little investment jargon as possible.
Avoid exaggeration. If you write that a company is going bankrupt or that its stock will triple, you had better back that up if you want the report published.