First Marblehead gets cheaper and I couldn't be happier

First Marblehead has lost 23.67% since I bought it in March (-98.36% annualized). Obviously, I would be happier if I had waited to buy, but getting cheaper is a good thing overall. Consider the Four Factors. The only one that has really changed since I bought is equity valuation, which has improved to 24¢ of equity per dollar of price. Other investors might have lowered their estimates of asset value and future earnings based on potential defaults or the potential acquisition of Sallie Mae. But I don't think those fears are warranted and I haven't changed my estimates.

Having already bought shares, how can the lower price help me? For one thing, I could buy more shares (double down). But as I'm short of investable cash, that isn't an option. If the price doesn't recover before First Marblehead distributes its next dividend, I'll be able to reinvest it at a lower cost. A more likely scenario is that First Marblehead will repurchase on the open market over the next few days.

There are potential disadvantages to a lower prices. For instance, if I needed to sell today, I would realize a substantial loss. Or a third party might attempt to takeover First Marblehead. Or if First Marblehead were to issue shares (perhaps as a part of executive compensation), it will get less value per share than it would have a few months ago. But as long as those things don't occur, lower prices can only be good for shareholders.

As for the "news" that has been driving down FMD's price, I'm not too worried. The default scare seems totally bogus. First Marblehead's estimate of residual value seems very solid.

The issue with the SLM buyout seems to be that two potential purchasers, JP Morgan Chase and Bank of America, are also two of First Marblehead's clients and might direct private student loan business to Sallie Mae. FMD's CEO has said that there will be no impact on his company. I don't see how there could be an immediate impact since neither company would control SLM. Two private equity investment companies, J.C. Flowers & Co. and Friedman Fleischer & Lowe LLC, hold majority stakes and I doubt they would be willing to give away Sallie Mae's competitive advantages to the giant banks. A scenario that seems more probably is that the banks will outsource their student loans to SLM over time. But they could have done that even before this buyout was proposed, so I don't see what the big deal is.