MGIC Rallies Up to a 52-week High - Analyst Blog

On Jun 19, shares of MGIC Investment Corp. MTG rallied up to touch a 52-week high of $9.48 per share. The impetus in the stock price movement was driven by a slew of positive news from the company, the most recent ones being the appointment of experienced executives to expand overall business and strong business statistics reported for the month of May.

Year to date, shares have added 11.2% to its price compared to 7.0% gain registered by the S&P 500.  MGIC was battered by the subprime mortgage crisis in 2008.  After having suffered massive losses in the past several quarters, finally the company started experiencing profits second-quarter 2013 onward, led by the improvement in the housing market, lower delinquencies and a pickup in mortgage insurance demand.

MGIC had successfully navigated through the financial crisis and its recent results reflect improving financial performance, steadily declining new delinquencies, and stronger regulatory capital profile, mainly as a result of capital raises and restructuring.

Management at MGIC is encouraged by the recovering demand for home purchases. It anticipates benefits from this market opportunity as the majority of purchases that need a mortgage do not require a 20% downpayment.

MGIC is regaining market share from the Federal Housing Authority (FHA). However, the pace of recovery has been slower than expected given the differences in underwriting guidelines, loan level price adjustments by the GSEs and the secondary market benefits associated with government-insured loans versus loans insured by the private sector. Other private mortgage insurers like Radian Group Inc. RDN and Genworth Financial Inc. GNW have also benefited from the improving industry trends.  

MGIC has a Zacks Rank #2 (Buy). Another stock, Old Republic International Corp. ORI with a Zacks Rank #1 (Strong Buy), is also worth considering.