Subprime Wow

Ever wondering why all the sudden your portfolio lost 10%, 20% or even worse 50%? Is it profit taking? Or is it because we are neither in the Christmas rally or pre summer rally? If you still haven't heard of subprime bust then it is about time to keep track of the daily financial headlines.

The subprime bust, triggered by waves of real estate foreclosure as real estate market cools down, has caused troubles to hedge funds, mortgage lender and REIT companies. The sectors taking the hardest hit, the mortgage lender and REIT, have seen companies either go bankrupt or are seeking financial help.

Now with the Fed lending its hand by cutting discout rate and injecting funding into the financial system, the surviving companies seem to attract bargain hunters after hitting multi-year low.

Let's take a look at the list of bargains:

• Countrywide Financial Corp. (CFC): the leading mortgage lender lost as many as 67% since its high and is now trading at $20, or 56% off it's high. It is the safetest best in the group with $2 billion funding from Bank of America and interest from billionair investor Warren Buffet
• Redwood Trust Inc. (RWT): despite turmoil in the mortgage related companies, this REIT is still declare quarterly dividend of 75 cents showing the company is still a financially strong. The stock went as low as $25.40 per share, a 62% lost from its high of $66.6 per share and is now trading at $37.93 per share, still a 43% discount.