Tag Archives: Radian Group

Business, Finance, Occupation & Industry

Mortgage Insurers Don't Feel the Heavy Hand of Regulators' Fines

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By Jessica Alling, The Motley Fool

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A settlement was announced Thursday between the Consumer Financial Protection Bureau and four of the nation’s top mortgage insurers over the improper tactics used to win new business. The CFPB stated that the insurers — AIG , Genworth Financial , Radian Group , and MGIC Investments — paid kickbacks to lenders who placed mortgage borrowers into their insurance policies.

Since mortgage insurance is generally required for loans where borrowers put down less than 20%, the market is a lucrative one, with insurers fighting for business. But with the practices outlined in the CFPB‘s investigation, the four insurers paid to have the lenders place borrowers in more expensive policies than if true competition had won out. Though none of the insurers claimed any wrongdoing, they have promised to avoid any such dealings in the future, and all settled in order to avoid litigation and further “distraction,” as Teresa Bryce Bazemore, president of Radian Guaranty put it.

They’ll pay, but not very much
The settlement calls for $4.5 million from both AIG‘s United Guaranty segment and Genworth Financial, while Radian and MGIC will pay $3.75 million and $2.65 million, respectively. Most of the companies won’t see a dent in their bottom lines due to the regulator’s fines. In fact, the low cost to settle was another incentive to avoid litigation mentioned by several of the insurers.

The CFPB‘s investigation may not be over. The lenders that participated in the schemes may soon find themselves under the microscope. And with at least a decade of dealings involved, millions of borrowers may have an opportunity down the road to recoup excess costs due to the lack of competition.

So what does this mean?
For investors, this news isn’t going to make a big splash. Though the news wasn’t positive, only AIG saw a decline in trading after the announcement, and it was down only 0.4%.

Insurer Daily Gain (Loss) Monthly Gain (Loss)
AIG (0.42%) (1.00%)
Genworth 0.53% 4.40%
MGIC 0.00% 16.51%
Radian 3.76% 3.55%

Source: Yahoo! Finance.

As you can see in the table above, very little impact from today’s news.

With regulator settlements, it’s often a one-and-done dip in trading, but in the case of this investigation, if banks get involved, or borrowers are able to file a class action lawsuit, there may be more ramifications for the insurers. Otherwise, this is just another example of how one day’s news doesn’t make a huge difference in your stock‘s performance.

As most Fools would tell you, it’s important to know what news events will effect your portfolio, but don’t let one day’s trading get you down about a solid investment opportunity.

At the end of last year, AIG was the favorite stock among hedge fund managers. Have they identified the next big multi-bagger, or are the risks facing the insurance giant still too great? In The Motley Fool’s premium report on AIG, Financials Bureau Chief Matt Koppenheffer breaks down the key issues that you need to know about if you want to successfully invest in this stock. Simply click …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

These 5 Stocks Are Off to a Great Start in 2013

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By Anders Bylund, The Motley Fool

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As we ease our way into April, the first quarter of 2013 is in the books. Here are some of the market‘s best performers so far, and why I think they will or won’t keep soaring the whole year long.

Will these rocket rides blast even higher in 2013 — or run out of fuel?
Image source: NASA.

The safest bet
Movie distribution expert Netflix jumped 104% in the first three months. The stock came into 2013 with rock-bottom performance expectations but blew skeptics away with a fantastic first-quarter report.

Subscribers have largely forgotten about the brand-damaging Qwikster debacle, and the international expansion program is building up a head of steam. Moreover, the House of Cards original-content experiment bowed to fine reviews and appears to set Netflix apart from other online film services, much like the premium cable networks jockey for position with Emmy-winning dramas.

The original content project continues with horror series Hemlock Grove in April, starring Famke Janssen and Bill Skarsgard under the guiding hand of genre master Eli Roth. Then there’s low-budget comedy Bad Samaritans and high-concept prison dramedy Orange Is the New Black, not to mention the reboot of cult series Arrested Development. These titles should help Netflix attract fresh subscribers, and the overseas expansion will keep Netflix growing for years to come.

Netflix shares may seem expensive right now, given the earnings-sapping costs of rapid expansion. But make no mistake: Netflix is cheap even at $200. If nothing else, the stock will pop again next January, with another holiday season under the bridge. This January bounce was no accident.

The housing experts
The housing market is suddenly booming again, at least in comparison with the miserable years between 2008 and 2012. This rebound has created a number of strong gainers on the market.

Online house-hunting service Zillow has gained 97% so far. The site enjoyed a 47% year-over-year increase in unique users, and management set expectations even higher for the next quarter.

Private mortgage insurer MGIC Investment soared to the tune of 86%, and rival Radian Group jumped 75%. Both companies crushed earnings estimates in March, and Barclays upgraded them to a “buy” rating. Bad loans from the subprime bonanza are fading away just as the market for new housing stabilizes. Owning these stocks seems less risky these days.

That being said, fellow Fool Sean Williams worries that MGIC‘s recapitalization plan will destroy shareholder value while its debts pile up sky-high. It’ll take a dramatically stronger housing market to make these issues go away, not the gradual return to health we’ve seen so far. It makes sense to lump Radian and Zillow into the same booming-but-risky category until further notice. Don’t invest money in these tickers that you can’t afford to lose, in case the rosy projections don’t pan out.

The bigger they are …
Here’s a shocker. There are 3,077 stocks on the U.S. markets …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Whoa! These 3 Stocks Thrive in Sequestration

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By Rich Duprey, The Motley Fool

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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.

Company

% Gain

MGIC Investment

27.8%

Dyax

19.6%

Cree  

14.4%

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

Business, Finance, Occupation & Industry

Why Mortgage Insurers Shares Soared

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By Sean Williams, The Motley Fool

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Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of mortgage insurers, including MGIC Investment and Radian Group , soared as much as 28% and 11%, respectively, following an analyst upgrade.

So what: Before the opening bell, Barclays upgraded both MGIC and Radian Group to “overweight” from “underweight.” The covering analyst, Mark DeVries, pointed to the fact that more upside than downside exists in the sector, and anticipates earnings will normalize by 2015 as legacy losses are wiped off the books. He placed a price target of $14 on Radian (about 42% upside from where it closed yesterday) and an $8 target of MGIC Investment (nearly 100% upside from yesterday’s close of $4.18).

Now what: I often mention that analyst upgrades should be taken with a grain of salt, but this call just seems so astronomically bad, I don’t even know where to begin. I can somewhat agree with Mr. DeVries with his take on Radian, which has a high, but shrinking, risk-to-capital ratio around 22. However, the movement and analysis on MGIC over the past few days is so far off base it’s ridiculous. The insurer has reported 10 straight quarterly losses, it’s risk-to-capital ratio is nearly double what U.S. regulators want to see at the high-end (44.7:1), and its CEO, Curt Culver, proclaimed that it’s likely to get worse before it gets better. As a reminder, insurers have been forced to stop writing policies or have been forcibly shut down for risk-to-capital ratios in the 42:1 to 58:1 range! This whole thing stinks of emotional trading and I’d avoid mortgage insurers like the plague at the moment.

Craving more input? Start by adding MGIC Investment and Radian Group to your free and personalized Watchlist so you can keep up on the latest news with the company. 

With so many of the big finance firms getting bad press these days you may be inclined to stay away from the sector entirely, but that could be a huge mistake. In fact some of the best opportunities over the next few years can be found there, including one small, under-the-radar bank. It’s been called one of “The Stocks Only the Smartest Investors Are Buying.” You can learn about it, and more, in The Motley Fool’s exclusive free report. Just click here to keep reading.

The article Why Mortgage Insurers Shares Soared originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

These Stocks Overcame the Dow's Monday Blues

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By Dan Caplinger, The Motley Fool

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As well as the stock market has performed lately, Mondays had been a sore point for the average. Until today, the S&P 500 hadn’t posted a single winning session on a Monday, and early on, it seemed like the stock market would maintain that streak. But later in the day, stocks recovered ground, and the Dow Jones Industrials finished the day with a gain of 38 points, hitting a new five-year high and covering half the ground toward its all-time closing high of 14,164. The Nasdaq and S&P 500 both rose more strongly.

Within the Dow, strength from the consumer sector overcame challenges on the industrial side of the market. Home Depot rose to a new all-time high, gaining nearly 2% as investors continue to gravitate toward housing plays. As long as data on home sales and housing prices remains favorable, you can expect investor sentiment for Home Depot to continue to be positive. Wal-Mart also gained ground, leading the Dow’s gainers with a better than 2% rise. An interesting story pointed to its work with newly public solar installer SolarCity to put panels on Wal-Mart and Sam’s Club stores in Ohio, but the more likely reason for gains is simply the retailer’s exposure to domestic economic forces that push shoppers toward more cost-conscious choices.

Elsewhere, Boyd Gaming rose 14% after announcing along with its earnings report that it has completed the sale of its Echelon property on the Las Vegas Strip. The company posted a wider-than-expected loss even after accounting for a one-time charge related to the ill-fated property, but given Boyd’s precarious financial situation, having resolved the issue once and for all clearly made investors feel more comfortable about its prospects moving forward.

Finally, mortgage-insurer Radian Group soared almost 8%. Not only has the company enjoyed favorable trends as home prices have recovered, but it also got upgraded by Keefe Bruyette this morning. With improving conditions suggesting that Radian and its industry peers could survive and thrive going forward, Radian’s shares arguably have a lot farther to run, especially now that the company has completed its capital-raising offering of stock and convertible bonds.

To find some promising long-term investing ideas, check out the Fool’s special report: “The 3 Dow Stocks Dividend Investors Need.” It’s absolutely free, so just click here and get your copy today.

The article These Stocks Overcame the Dow’s Monday Blues originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance