Posts tagged ‘monoline’

Jan 26

MGIC: Is Something out of Whack?

MGIC has really taken it on the chin over the last couple of days. While I can’t speak to the cause of the move down on Thursday, the fall on Friday, which was followed by further pressure in after hours trading, was precipitated by a note from Macquarie analyst jasper Burch.

Burch called MGIC’s valuation “out of whack”, cited earnings and book value pressure, and suggested that there was “an outside chance” that the regulators might “pull the plug”.

I found the comments surprising.

First, I don’t think his regulator comment is consistent with MGIC’s disclosure (from the SeekingAlpha transcript).

We regularly provide updates to both the GSEs and the OCI of our expectations regarding our capital position and as a result this quarter’s results including the risk to capital ratio are not a surprise to them. The GSEs and the OCI understand that our forecast calls for the risk to capital ratio of Magic to continue to rise for some time to come. The exact timing of when it will begin to decline is subject to among other things, the level of new notices and cures, the amount of new insurance written to Magic and the outcome of dispute resolutions.

Nov 4

On Barrons on Radian

There was a piece published in Barrons this weekend on Radian Group. Barrons is free this weekend so anyone can access it here. The article. written by Jonathan Laing follows quite closely the arguments written in this SeekingAlpha piece. Honestly, there is so much overlap between the two articles that I would have hoped that the writer of the Barrons piece contacted OliverDavies, who wrote the SeekingAlpha article, before writing his.

In my post, Does Radian Guaranty have a liquidity problem?, I considered most of the arguments made by Barrons and even came up with my own spreadsheet model to see if they were valid I have yet to hear of any major errors in my analysis, and it is an analysis I have went over a number of times since then in order to verify. Thus I remain of the opinion that my analysis is fair and that my conclusion that Radian Guaranty will not run into a liquidity problem absent the drop of another shoe in the housing market.

I have to wonder whether Johnathan Laing ran his own cash flow analysis before publishing his work. Did he create a model that showed Radian Guaranty would run out of cash? I would love to see that model. I am not academic about this argument; if someone can prove me wrong I will sell my stock and move on. I really couldn’t care less whether I am right or not, I only want to make money on the opportunity. Read more

Sep 13

Taking some profits with Radian Group and MGIC

I took some of my position in Radian Group and MGIC off the table yesterday. I sold half of my position in MGIC and about 30% of my position in Radian.

The stocks have moved quite a lot in a short period of time. I was buying MGIC at under 80 cents a month ago. I bought Radian in the mid-$2’s in July. These are pretty big moves.

The fundamentals behind the stocks are improving. My thesis that the housing market is bottoming is showing more evidence of playing out. Delinquencies are falling, foreclosure rates are falling.

Yet while I remain optimistic that they can outrun their legacy book, the possibility remains that they won’t.

There were a couple of events today that outlined that uncertainty.