Don’t Miss These High-Flying, Potential Two-Baggers

It's been less than three weeks since I trained my eye on mortgage loan insurers, noting that they have been making an amazing recovery from their near-death experiences during the mortgage crisis. This week, it seems, the sector is rocketing skywards once again -- as Radian Group (NYSE: RDN  ) , MGIC (NYSE: MTG  ) , and even troubled MBIA (NYSE: MBI  ) experience pleasant highs. Notably, all of these insurers have seen their share values soar by more than 60% since the beginning of the year.

Mortgage insurers took a beating, but are looking victorious
Just surviving the massacre that took place when mortgages began going south is quite a triumph in itself, but these mortgage insurers have proven themselves a resilient bunch -- and not afraid to get scrappy when the need arises.

Radian's stock has been on an upward trajectory since its fourth-quarter results, despite missing on EPS targets. The news that the company more than doubled the value of policies written in 2012 compared to the year previous, along with its low risk-to-capital ratio and comfortable revenue estimate beat has doubtless put smiles on its investors' faces. The insurer has received two analyst upgrades in as many weeks.

Despite a beat on revenue estimates, MGIC reported a net loss for the fourth quarter , though a charge pursuant to a dispute with Freddie Mac was reflected in that number. Nevertheless, the company noted that loan defaults were down, and despite a very high risk-to-capital ratio of 47.8:1, investors rallied when management guaranteed that raising capital when needed would not be a problem.

MBIA has really been kicked around by Bank of America (NYSE: BAC  ) in their ongoing brawl over slimy mortgage-backed securities and MBIA's bid to split its mortgage business from its healthier units, which B of A sued to prevent. Now, bruised-but-not-beaten MBIA has emerged victorious, as the state of New York Supreme Court has upheld the approval by the NY State Insurance Department to allow that business division. After that bit of swell news, MBIA's stock rocketed upwards by more than 24%.

Nowhere to go but up
An improving housing picture has certainly helped these companies make such a great recovery, new home sales shot up to a four-year high this past January. Another helping hand was lent by the Federal Housing Administration, which has been ratcheting up its program of fee increases and rule tightening-- which will, eventually and almost certainly, result in more market share for these three companies.

While the climate is changing in favor of these insurers, the fact that they persevered in the face of daunting headwinds -- writing new business with unflagging vigor and working with regulators to make that happen -- shows real pluck. That kind of attitude is sure to bring them two-bagger status by summer -- and you can quote me on that. 

The clearing on the economic horizon is floating other boats, as well. To learn more about a few ETFs that have great promise for delivering profits to shareholders in a recovering global economy, check out The Motley Fool's special free report "3 ETFs Set to Soar During the Recovery." Just click here to access it now.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2293369, ~/Articles/ArticleHandler.aspx, 9/2/2014 10:47:51 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement