Should you follow Yellow Brick Road?

In recent weeks, the market has taken a wild ride. The finance sector has been one of the hardest hit with the major banks share prices being stripped away. The Commonwealth Bank of Australia (ASX: CBA) after hitting a bottom price of just $25 in the height of the GFC, was trading at $73 only weeks ago. To date, it is still up 74% on a five-year past performance view. But it’s not the only player in the field.

A new kid on the block is Yellow Brick Road Holdings (ASX: YBR), currently trading at $0.52. Founded by Mark Bouris, Yellow Brick Road is a full service wealth management company that offers products and services for home loans, commercial loans, financial planning, insurance, superannuation, investments, accounting and tax.

After securing a deal with Macquarie Group (ASX: MQG) last year, Yellow Brick Road is offering home loans at very competitive rates that beat most of the banks. As of March 2013, Yellow Brick Road has secured around $1.26 billion worth of home loans, and is poised to obtain more in a home loan market worth approximately $1.1 trillion.

In a recent ASX announcement release, the company said, “[Yellow Brick Road] is taking its market leading Empower Home Loan offer one step further, announcing a first year 1.25 per cent discount for all borrowers with a lifetime discount of between 0.86 per cent and 0.91 per cent p.a.” With Macquarie as a financial backer and stakeholder, there is room for growth.

Macquarie Group is currently trading at $42.18, down 9.49% on a five-year past performance view, but up 65.61% on a one-year past performance view. Even though Macquarie Group has expanded its home loan book by more than half in the past six months it has also been hit in the recent month, just like all the other banks, down from a height of $47. In my opinion, that’s a good buying price.

Foolish takeaway

Mr Bouris and Yellow Brick Road – with the help of Macquarie — are offering mortgage holders the better deals they are after. In a time where it is now easier to refinance, Yellow Brick Road is well-positioned to succeed, and so is Macquarie. Investors would do well to consider adding either company to their watchlists.

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Motley Fool contributor Roberto Galeano does not own shares in any of the companies mentioned in this article.

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