Advantus: B&C Climate Creating Opportunities

Investor negativity toward subprime lending in general is creating investment opportunities, according to a report from Advantus Capital Management."[I]nvestors have come to view all things subprime as radioactive, punishing companies even marginally involved," says the report by investment analysts Joseph Scanlan and Sean Timonen. "But when investors overreact, opportunities emerge." Companies that relied on subprime lending as their sole business are in trouble, the report says, "but for every company that fits that profile, others are being found guilty by association." Companies with a strong parent -- the authors mention HSBC Finance and Residential Capital -- are better positioned to withstand market pressures. ResCap, whose owner GMAC is having a majority stake in it sold by GM to Cerberus, will get capital from that sale, allowing it to maintain investment-grade ratings. Opportunities exist in the subprime arena for "astute buyers" to scoop up firms at "severely reduced prices," the report says. Investors looking beyond the headlines "will be able to fish excellent opportunities out of the sea of subprime bad news," Advantus says.