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Monday, August 9, 2010

Mortgage Bond Insurers Earnings Reports

We've seen a few of them come in and because I was most bullish on MGIC (MTG), I will start with that.

MGIC's 2nd quarter results actually weren't half bad. Hell, they even turned a profit, though they seemed to indicate that they didn't expect this to continue and brief blips like this aren't uncommon in depressed industries as a general rule. That being said, they seemed to have a favorable market response even if they have dropped off a bit since then. MGIC is one of the few that actually seems to be able to provide any clarity about the future, even if that clarity is not overwhelmingly positive.

Radian (RDN), reported on the 3rd and got walloped by the market that day. "Walloped" is a technical term meaning they dropped more than 15%. There was fairly little good to say about these results and even though the stock got marked down severely it still isn't more attractive than it had been. The results were genuinely poor.

MBIA (MBI) and Ambac (ABK) both reported today and the performances of the stocks tell the tale. MBIA is up 7% while Ambac is down 17%. MBIA, like MGIC, turned a profit, albeit a paltry $14 million. Further, they seemed to indicate that there is a gradual trend of improvement. In terms of tone, their report seemed more positive than MGIC's. Ambac, on the other hand, is trash and I choose to ignore it.

Now, to my credit, I said MGIC and MBIA were the best of the sector, though I did give MGIC the tip over MBIA, which may or may not have been a mistake. In any case, here's how the stocks have performed since we mentioned them on July 22nd.

Incidentally, Ambac has performed the best so far, but that will change with tonight's earnings reports. They have generally been a bunch of dogs, particularly Radian and PMI, but I still think that the earnings reports indicate that MGIC and MBI are the winners here and maybe buying both to hedge one's bets might be a decent value play going forward.

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