Here's Why MGIC Investment, Rent-A-Center, and Isle of Capri Casinos Tumbled Today

Even though stocks eked out modest gains, these three stocks didn't manage to climb back to even. Find out why.

Jul 11, 2014 at 7:21PM
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The stock market generally behaved well Friday, once again getting off to a slow start as investors weighed the latest releases from the beginning of the new earnings season. By midday, though, stocks had begun to recover from their worst losses of the day, and by the close, the market managed to post modest, but solid, gains. Still, even though the week ended on a confident note for investors generally, not all stocks managed to move higher Friday, with MGIC Investment (NYSE:MTG), Rent-A-Center (NASDAQ:RCII), and Isle of Capri Casinos (NASDAQ:ISLE) among the worst performers in the market.

Mtg
Source: www.stockmonkeys.com.

MGIC Investment dropped almost 10% today after the mortgage-insurance provider alarmed investors about its potential inability to meet proposed new capital guidelines from the Federal Housing Finance Agency. The FHFA today opened up a draft of Private Mortgage Insurer Eligibility Requirements designed to help mortgage insurance companies like MGIC prove that they can handle future financial crises, with the goal being to prevent a repeat of the mortgage meltdown that led to the bear market in stocks in 2008. But MGIC said that, based on its initial preliminary look at the rules, its available assets wouldn't be enough to meet the minimum required under the new guidelines. MGIC hopes to restructure some of its reinsurance arrangements to better meet the guidelines, but if it can't correct the problem, MGIC could have trouble moving forward in the rapidly changing mortgage market.

Rent-A-Center sank 11% in response to a poor reception to its second-quarter preliminary results. The rental company said same-store sales would rise just 0.6%, and earnings per share could come in as much as 25% short of where investors were expecting. Rent-A-Center responded to the negative news by announcing a new initiative to offer smartphones to rental customers. But the report only heightens what we've already seen for years during this economic recovery: Lower-income customers, who count on rent-to-own arrangements like the ones Rent-A-Center offers, are not participating fully in job and wage gains. Until the recovery becomes fairer, Rent-A-Center could keep seeing pressure to its bottom line.

Isle of Capri Casinos fell almost 14% when the domestic gaming company announced that it would eliminate its executive chairman position on its board of directors, and consolidate its current chief strategy officer into the CFO role. But the decline likely came from speculation that the move reduced the chances of a possible takeover for Isle of Capri Casinos, with the stock having risen more than 50% in just a month. Bullish investors believe that a potential acquirer might be able to do more with the company's casino properties than Isle of Capri has thus far managed. Still, with the gaming market in flux, investors want to be certain about a bid before they're willing to send shares any higher.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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