Deep Breathing; Greater Expectations: Best of Kass

NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

Among the posts this past week were entries about the shot heard round the world and his projections for Altisource Residential.

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The Shot Heard Round the World
Originally published on Thursday, Oct. 3 at 8:38 a.m. EDT.

By the rude bridge that arched the flood,
Their flag to April's breeze unfurled,
Here once the embattled farmers stood,
And fired the shot heard round the world.

-- Ralph Waldo Emerson, "Concord Hymn"

During confusing times like these in the investment business, I like to retreat into books or into history in an attempt to deflect and even ignore (even for a brief period of time) the ridiculous systemic issues we face in our country.

My experience is that this sort of rerouting puts it all into perspective.

Ralph Waldo Emerson was a key early American philosopher, poet and writer, particularly known for his appreciation of individualism, self-reliance and intuition. He wrote "Concord Hymn," which was sung as a hymn at a July 4, 1837, ceremony to mark the completion of the Concord Monument, to immortalize the resistance of American Minutemen to British forces on April 19, 1775.

The "Concord Hymn's" key phrase "the shot heard round the world" is now internationally famous for its description of the philosophical importance of the American Revolution. Since then, the phrase has also been used to allude to the importance of single actions in cultural and sporting events. For example the shot that killed Archduke Franz Ferdinand of Austria (which plunged Europe into World War I) was referenced by the phrase.

Baseball's Shot Heard Round the World

Bobby Thomson up there swingin'. He's had two out of three, a single and a double, and Billy Cox is playing him right on the third-base line. One out, last of the ninth. Branca pitches. Bobby Thomson takes a strike called on the inside corner. Bobby hitting at .292. He's had a single and a double, and he drove in the Giants' first run with a long fly to center. Brooklyn leads it 4-2. Hartung down the line at third not taking any chances. Lockman with not too big of a lead at second, but he'll be runnin' like the wind if Thomson hits one. Branca throws. (Sound of bat meeting ball.) There's a long drive. It's gonna be, I believe. The Giants win the pennant!! The Giants win the pennant! The Giants win the pennant! The Giants win the pennant! Bobby Thomson hits into the lower deck of the left-field stands! The Giants win the pennant and they're goin' crazy, they're goin' crazy! Heeey-oh!!! (Ten-second pause for crowd noise.) I don't believe it! I don't believe it! I do not believe it! Bobby Thomson hit a line drive into the lower deck of the left-field stands, and this blame place is goin' crazy! The Giants! Horace Stoneham has got a winner! The Giants won it by a score of 5 to 4 and they're pickin' Bobby Thomson up and carryin' him off the field!

-- Russ Hodges, WMCA-AM radio (Oct. 3, 1951)

While the government shutdown holds center stage today, this date (Oct. 3, 1951) holds a special place in baseball history (as Sir Arthur Cashin mentioned yesterday in his morning commentary). It was the day (not only on Edgecomb Avenue in the Bronx) but throughout the country that "the shot heard round the world" occurred on the baseball field.

It was Oct. 3, 1951 that Brooklyn Dodgers pitcher (and my buddy/pal/friend) Ralph Branca served up a home run to the New York Giants' Bobby Thomson in the bottom of the ninth inning of the final game of the National League pennant playoffs at the Polo Grounds.

Seeing the ball disappear over the fence, Thomson hopped crazily around the bases then disappeared into the mob of jubilant teammates who had gathered at home plate. The stunned Dodger players trudged off the field -- all except Robinson. No doubt knowing of "Merkle's Boner" 43 years earlier, he watched to be sure Thomson touched every base before he too headed for the clubhouse.

To this day, the shot heard round the world that day is the single most remembered incident in baseball history. I still get goose bumps every time I listen to the television broadcast (the first coast-to-coast live broadcast of a baseball game) by Ernie Harwell and Red Barber and Russ Hodges' radio broadcast (above), which is generally believed to be the most famous sports broadcast of all time.

Following the game, legendary sportswriter Red Smith opened his recap of the game for the New York Herald Tribune with the following lead (I have previously recommended American Pastimes: The Very Best of Red Smith as a great holiday gift for a friend or relative):

Now it is done. Now the story ends. And there is no way to tell it. The art of fiction is dead. Reality has strangled invention. Only the utterly impossible, the inexpressibly fantastic, can ever be plausible again.

Through my relationship with Sandy Koufax and my involvement in the harness racing business, I met Ralph Branca decades ago. He and his wife became my good friends.

It's a pretty good crowd for a Saturday
And the manager gives me a smile
'Cause he knows that it's me they've been comin' to see
To forget about their life for a while

And the piano, it sounds like a carnival
And the microphone smells like a beer
And they sit at the bar and put bread in my jar
And say, "Man, what are you doin' here?"

-- Billy Joel, "Piano Man"

So, take a breath, read a good book or think about some old memories (like Ralphie's pitch) "to forget about life for a while," as Billy Joel instructs us in "Piano Man."

I have this morning taken my own advice.

And I guarantee it will put all the nonsense in Washington, D.C., into perspective.


Greater Expectations for Altisource Residential
Originally published on Wednesday, Oct. 2 at 9:06 a.m. EDT.

This morning, I am raising my earnings, dividend and share price expectations for Altisource Residential ( RESI).

Several factors are positively influencing the direction of the company and are contributing to a more optimistic (and more "growthy") outlook than I previously anticipated. (Hat tip to subscriber H for pushing me in this analytical direction!)

Most important, the company's ability to access the public markets at a higher price-to-book value and in greater dollar raises is the catalyst for this morning's outlook upgrade.

Last week, RESI raised money through a secondary offering that was increased from 10 million to 15 million shares. It was done at a greater premium to tangible book of $18.34 a share than I had previously forecast. Since the deal was done at a higher price, the EPS impact is more accretive).

Given its greater capital base, Altisource Residential has been able (and will be able in the future) to more aggressively purchase and board nonperforming loans and properties. The company has recently or will soon close on $470 million of unpaid principal balance in nonperforming loans with 2,700 properties (1,854 properties in third quarter and the balance in the fourth quarter). And as reported in a recent 8-K, RESI signed an agreement in principle to acquire nearly 3,000 nonperforming loans with $922 million unpaid principal balance. These assets have approximately $800 million of market value for which RESI is paying only about $540 million (or 67% of ultimate value). Upon full closing of the deal, RESI will have $1.7 billion in unpaid principal balance, (roughly $250,000 per property) or about 7,000 loans, representing approximately $1.4 billion in market value ($200,000 per property) and having paid about $950 million for the properties ($135,000 per property).

The bottom line is that I am raising my expectations for earnings available for cash dividends by $0.15 in 2014, to $1.50 a share (or $162.5 million net income), and by $0.25 in 2014,to $1.75 a share (or $215 million net income).

More aggressive and more successful property acquisition results than I am modeling for could raise these profit forecasts further.

My share price target by year-end 2014 is now $28 a share, and RESI remains on my Best Ideas list.

At the time of original publication, Kass was long RESI.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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