Managers Split on Subprime

Some money managers are looking beyond the real estate business for opportunities tied to the recent plunge of subprime lending stocks.

Mortgage companies such as Accredited Home (LEND), Fremont General (FMT) and NovaStar (NFI) have become some of the most heavily traded names on Wall Street since problems have emerged in the business of lending to homebuyers with weak credit histories.

Shares in the sector were hammered when lenders ranging from HSBC (HBC) to New Century (NEWC) admitted that recent loans were going bad at a rapid clip. Selling fed what one mortgage company called an "irrational panic" in the business of selling mortgages as securities, though recently fears have subsided somewhat as big investors said they would be bottom-fishing.

The steep selloff in the sector has some institutional managers trying to benefit from others' losses. But many others say they still see value in the sector.

Orlando, Fla.-based Beacon Hill Financial, which serves as an adviser to financial planners to the wealthy, says it is eyeing investments in companies it believes will benefit from the shrinking pool of mortgage lenders, says Jon White, principal.

He points to major banks that have taken a dip because of their link to subprime lending businesses. Those include Citigroup (C) and HSBC, which own subprime lending outfits.

"Right now we're looking at financial firms for when they hit the bottom," White says. "Let the market overreact and we can take a couple of names."