Redwood Trust, Inc.
Thesis
I like the company because I see an increasing set of fees and assets on which they can generate returns. The stock has done very well over the past six months, and if we have a really good housing market and Redwood continues to sell RMBS securitizations, the stock could still double over the next two or three years.
Did it work?
The thesis was a long predicated on housing strength and continued RMBS securitization volumes driving the stock to double over two to three years. Instead, the stock fell approximately 80% since the pitch — a decline so severe that it decisively invalidates the bull case regardless of how much of the stated horizon remains, since the stock would now need roughly a 9x move just to reach the original 'double' target. The housing/RMBS tailwind the thesis depended on clearly did not materialize as expected.