Short Thesis Still Intact at FirstFed

I have been bearish on FirstFed Financial (FED) for sometime and despite the stock’s recent run up and what would appear at first glance to be a slight improvement in the company’s underlying fundamentals, I believe that the short case for the company bears reiteration. 

FirstFed, like all California mortgages lenders, has been absolutely devastated by the terrible events out in California.  The company specializes in ARM mortgages and has only recently been making an effort to move into the traditional mortgage market in scale.  While this has definitely been a good decision on the part of management, I am not sure that it will be enough to prevent the company from being forced to do a massively dilutive share offering in the near future.  Such a transaction would be in the best interests of the depositors of the bank and I cannot imagine why management has not already tried to sell shares of the company into the recent strength shown by the company’s stock.