Since sequestration kicked in on Saturday and The End of The World As We Know It was supposed to materialize, the Dow Jones Industrial Average has packed on an additional 164 points, an almost 1.2% jump from where it closed on Friday. It was up 126 points yesterday alone and pushed the index to a new five-year high.

Had we known massive spending cuts would generate such market enthusiasm, we could have allowed sequestration to begin when it was supposed to at the start of the new year.

The three stocks below, however, had their own causes to celebrate, but resist the urge to high-five everyone in the cubicles next to you. Smart investors won’t celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.

Insuring housing’s future
They were some of the biggest casualties of the housing market implosion, but today, mortgage insurers are the market darlings, the epitome of the industry’s nascent recovery, and its potential as the government scales back its dominance of the mortgage industry. Both MGIC Investment and Radian Group have soared in value over the past week with the former more than doubling in price and the latter up a not-so-insignificant 24%.

Both companies have used the opportunity to raise more cash. Radian started the funding cycle by raising $689 million selling stock and notes while MGIC followed with a dual set of announcements that it would float 135 million shares of common stock and $350 million in convertible notes that come due in 2020.

Analysts say the clouds have parted for the insurers, and Barclays thinks it’s no longer how much further down they’ll fall, but rather “how much upside there still is despite the big move since bottoming in August.” The industry could return to normalized earnings by 2015 as it moves toward profitability and the high-risk legacy business expires, but of the two, MGIC is seen as the better bet by analysts because Radian has greater capital needs.

Seems to me if the FHA is trying to limit its risk by limiting the scope of its exposure, that could mean the private mortgage insurers will be incurring it. In the short term, this may benefit MGIC, but longer term, we may find ourselves right back where we were.

License to kill
Biotech Dyax also jumped after analysts weighed in on its prospects with Jeffries Group setting a $6 per share target on its stock.

While it might seem to be a bit of too little, too late when it comes to Dyax, since it was one of the best performing stocks in the market last year having surged 156%, the Jeffries analyst says there’s still a lot of room to run yet because of its …read more
Source: FULL ARTICLE at DailyFinance