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SUMMARY Q4 2019: WHOSE HOT? RADIAN, MGIC, ESSENT GUARANTY AND, NMI HOLDINGS
#1 RADIAN
RADIAN had NIW of $22.0 billion vs $15.8 billion a year ago. Ending the quarter with $237.2 billion in force leading the group.
In addition, RADIAN repurchased $3.3 million in company stock.
Book Value was $19.40.
MGIC had NIW of $19.3 billion, slightly under $19.1 billion in Q3 and up from $12.2 billion in Q4 2018. MGIC appears to be taking a more aggressive approach in sales under the new CEO Tim Mattke.
Book value was 12.41
They repurchased 1.4 million in shares and had $111 million remaining under a previously announced repurchase program. They announced a new program for $300 million share repurchases over the next 2 years.
Both ESSENT Guaranty and NMI HOLDINS posted declining NIW sequencially, quarter to quarter but, increasing NIW year over year.
ESSENT had NIW of $15.8 billion vs $18.7 billion in Q3 2019 and, $11.4 in Q4 2018.
Insurance in force $164 billion
Book value $30.34
NMI HOLDINGS had NIW of $11.9 billion vs $14.1 billion in Q3 2019 and $7.0 billion in Q4 2018.
Insurance in force $94.8 billion
Book value $13.61
DIVIDEND PAYMENT DATE: FEBRUARY 11TH FOR MTG
Payout date February 28th.
IT'S ALL ABOUT HEAVY CASH FLOW WITH MGIC
In the past we have talked about MGIC'S STRONG NET CASH FLOW creating unique opportunities for MGIC'S OPERATIONS AND SHAREHOLDERS.
THIS IS AN ARTICLE WRITTEN BY AN ANALYST WITH SEEKINGALPHA:
"Gary J. Gordon
Long Ideas
Financials
MGIC: Big Q4, The Cash Cow Story Keeps Unfolding
Feb. 05, 2020 4:57 AM ETMGIC Investment Corporation (MTG)1 Comment
Summary
The key to the story - the "housing risk index."
MGIC's excellent Q4 credit stats underscore the positive macro trend.
Operating EPS continues its sharp growth.
The cash cow math.
My target price of $25 is up 70%. Looks like a long wait.
MGIC (NYSE:MTG) was the first of my hero mortgage insurers to report Q4 EPS. Wall Street analysts expected $0.43 in EPS. Instead, MGIC came up with $0.49. It now beat estimates for the past 12 quarters. That’s good, right?
The surprisingly strong earnings are starting to be returned to shareholders in large quantities. MGIC announced a $300 million stock buyback to be used over the next two years, and another nearly $300 million per year available for dividends and buybacks. MGIC should use essentially all of it.
I am starting to see MGIC and its fellow mortgage insurers as decade-long cash cow stories. As the story unfolds, I expect the mortgage insurers’ current 8 P/E ratios to migrate to 12+. That indicates a $25 or greater target price for MGIC, up 70% from the current price.
The key to the cash cow story – The “housing risk index”
The source of the surging cash flow has been over a decade in the making. While I’m sure you’d be stoked to hear that I have a 600-page review of that history, I’ve summarized it in one chart – my patent-pending “housing risk index.” Mortgage credit is very largely a function of two factors – mortgage credit quality and the level of excess housing (vacancies). In previous posts I separately presented these factors. Here I combine them into one index:
Sources: Urban Institute, Census Bureau
The chart shows that housing risk was already material in 1998 (mostly poor lending standards), when the Urban Institute was first available. The risk soared up to 2007 (even stupider lending, and gross overbuilding) – the infamous housing bubble. Since then, though, housing risk has steadily declined. And it is still falling, from already-low levels. Twelve years of responsible behavior is highly unusual in the finance business.
These 12 years of sobriety has worked wonders for MGIC’s mortgage default insurance claims paid:
Sources: Urban Institute, Census Bureau, company reports
One last point on housing risk – the lag. The second chart shows that mortgage defaults don’t start rising five days after housing risk rises – it takes five years. It is therefore reasonable to forecast that MGIC won’t see a sharp rise in claims payments this whole decade. A ten-year run wouldn’t be so bad for shareholders, would it?
MGIC’s Q4 credit risk stats confirm the long-term trend
A few data points:
The credit risk of MGIC’s new insurance in force continues to be pristine. For example, insurance on low-FICO and high debt burden borrowers declined in 2019 from 2018. And despite rapidly growing U.S. home equity, insurance on cash-out refinancing shrank in 2019 vs. 2018.
Delinquent loans declined by 9% last year despite insurance in force increasing by 6%.
Q4 primary claims paid were $42 million, down from $62 million the year before, and half the Q1 2018 level.
The total amount of claims paid on the insurance written over the past decade was $73 million. Claims paid for the 2005 through 2007 books? $12 billion.
Guess who’s growing earnings? Not just Amazon
MGIC’s rock-bottom P/E ratio – at 8, it is in the bottom decile in the S&P 500 – suggests that it can’t grow earnings. But here is my version of core EPS, which adjusts for changes in MGIC’s loss reserve, over the past eight quarters:
Sources: Company reports
Here are MGIC’s sources of EPS growth, comparing this Q4 to a year ago:
Going forward, EPS growth will come largely from two sources. One is the continued decline in claim payments. The $42 million of Q4 payments should be down to $20 million by the end of ‘21, adding $0.25 to annual EPS. The other source is shares outstanding. I assume MGIC buys back $200 million of stock both this year and next year. That will reduce its share count by 7-8%, adding about $0.15 to EPS. That takes operating EPS, which is running at about $1.75 at present, to about a $2.15 rate two years from now.
The excess capital math
The cash flow from MGIC the Cow comes from excess capital. The mortgage insurers’ capital story is a bit messy, but here are the key facts for MGIC:
It has $5.8 billion of capital under the PMIERS (don’t ask) standard.
Its minimum PMIERS requirement is $4.6 billion, leaving it with $1.2 billion extra capital. And a lot of the MGIC’s old junky insurance book (pre-’08) requires a disproportionate amount of capital but is paying down at 20%+ a year. As the old junk pays down, MGIC’s capital requirement declines.
MGIC is generating about $600 million of new capital a year.
Growth in insurance in force of 6% at present needs $200 million of retained capital a year.
Putting these facts together suggests that MGIC will generate:
Annual excess cash flow of $400 million a year.
A sporadic release of excess capital averaging $200 million a year. My guess is that over the next five years $1 billion will be released, including $320 million just released.
The resulting total of $600 million of annual cash flow is about $1.60 a share, used for dividends and share repurchase.
The valuation math
If these numbers don’t get you excited, please put all your money in an index fund:
A P/E of 7.8 of likely $1.85 EPS expected for this year. Literally one of the lowest P/Es in the S&P 500.
An 11% cash yield ahead. Compare that to junk bond yields.
The stock is selling at only 90% of liquidation value (my estimate). Find other stocks doing the same.
My target price is $25, up 70%. You can’t just own Tesla (NASDAQ:TSLA), can you?
Disclosure: I am/we are long MTG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article."
WELL, MGIC IS FIRING ON ALL CYCLINDERS BEATING ALL ESTIMATES IN Q4 2019
"Feb 4, 2020
Fourth Quarter 2019 Net Income of $177.1 million or $0.49 per Diluted Share
Fourth Quarter 2019 Adjusted Net Operating Income (Non-GAAP) of $176.1 million or $0.49 per Diluted Share
Full Year 2019.
Earnings of $673.8 million or $1.85 per Diluted Share
Full Year 2019 Adjusted Net Operating Income (Non-GAAP) of $669.7 million or $1.84 per Diluted Share"
Seeking Alpha"
"GIC Investment reports Q4 beat, $300M buyback program
Feb. 04, 2020 7:23 AM ETMGIC Investment Corporation (MTG)By: Liz Kiesche, SA News Editor
MGIC Investment (NYSE:MTG) Q4 adjusted operating EPS of 49 cents beats the average analyst estimate of 43 cents and increased from 42 cents in the year-ago quarter.
In Q1, MTG gets authorization to buy back $300M of common stock through the end of 2021.
MGIC received approval to pay the holding company a special dividend of $320M and a quarterly dividend of $70M.
"We expect that our insurance in force will grow modestly, and that the number of new mortgage delinquency notices received and the amount of claims paid will continue to decline in 2020," said CEO Tim Mattke.
Q4 total revenue of $311.6M exceeds the $307.1M consensus and rose from $285.6M a year ago.
Q4 new insurance written of $19.3B vs. $12.2B in Q4 2018.
Insurance in force of $222.3B at Dec. 31, 2019 increased by 2% during the quarter and 6% vs. Dec. 31, 2018.
Primary delinquency inventory of 30,028 loans at Dec. 31, 2019 decreased from 32,898 loans at Dec. 31, 2018. Primary delinquency inventory declined 9% Y/Y.
Conference call at 10:00 AM ET.
Previously: MGIC Investment EPS beats by $0.06, beats on revenue (Feb. 4)"
MGIC AND RADIAN TO BLOWOUT Q4 EARNINGS ON HIGHER INS AND LOW DELINQUENCIES
MGIC AND RADIAN STILL HAVE HIGH RESERVES ON NAGGING DEFAULTS FROM 2007-2009 FINANCIAL RECESSION BUT, LOOK FOR POSITIVE RESERVE DEVELOPMENT IN Q4 2019.
IN ADDITION, ACCELERATING INSURANCE IN FORCE WILL BLOWOUT EARNINGS ESTIMATES.
Lock and load MTG...
MORTGAGE DELINQUENCIES DOWN 12.42% IN DECEMBER: BLACK NIGHT'S "FIRST LOOK"
MORTGAGE DELINQUENCIES CONTINUE TO DEFY SEASONAL TRENDS IN DECEMBER 2019 TOO!
MORTGAGE NEWS DAILY
JANUARY 23, 2019 9:07AM
BY: JANN SWANSON
Foreclosures at 14-Year Low; Loan "Mortality" up 126% Annually
Even though many of the measures are already at record lows, mortgage delinquencies continue to tick downward according to Black Knight's "first look" at December loan performance data. At the same time, the Single Month Mortality (SMM) rate, an indicator of mortgage loan prepayments, continues to increase, but at a slower rate.
Mortgage delinquencies fell by 3.75 percent from November to December and were down 12.43 percent compared to December 2018. At the end of the month there were 1.80 million loans that were 30 days or more past due, although not in foreclosure, 3.40 percent of all mortgaged homes. That delinquency rate is 0.04 percent away from the record low set in May 2019.
Serious delinquencies declined by 12,000 month over month and 84,000 on an annual basis. At the end of December there were 427,000 loans that were 90 or more days past due but not in foreclosure.
Foreclosure starts did increase during the month, jumping by 18 percent to 39,500. This is still 14.70 percent fewer such legal actions than in December 2018.
The foreclosure inventory, loans in the process of foreclosure, stands at 427,000. This is 3,000 fewer than in November and an annual decline of 26,000 loans.
The national foreclosure rate fell again in December to reach a new 14-year low of 1.48 percent (foreclosure sales as a percent of serious delinquencies.) This is the lowest rate on record except for the final five months of 2005.
After falling by 19 percent in November, prepayment rates ticked upward in December, rising 1.43 percent to a SMM rate (single month mortality rate... basically a measure of how quickly loans are being paid off due to refinancing or selling to purchase a new home) of 1.48 percent. This is 126 percent higher than the SSM a year earlier.
READY FOR FLIGHT MGIC INVESTMENT
MGIC is strong financially and fundamentally sound.
• Over $600 net cash annually, 19% growth
rate annually
• Over $600 million net profits annually
• 9.9 RISK TO CAPITAL ranking, best in PMI
INDUSTRY
• 7.85 PRICE TO EARNINGS RATIO, lowest in
PMI INDUSTRY
• 1.1 PRICE TO BOOK RATIO
• .17 to 1 DEBT TO CAPITAL ratio
The macroeconomic backdrop for the PMI INDUSTRY is constantly improving since US FINANCIAL crisis that occurred in 2008. The credit quality of their insurance portfolio is the best ever and they to are in size.
MGIC learned from the "great recession" and, they now have over 60 years of quality operations since starting the PMI business in 1957.
"ALL ABOARD MTG"
TODAY is the last day of "pin the tail on the donkey" at $14.
The large amount of Jan 17, $14 put options expire after today's trading. Then, MTG will be free to go.
BACK TO $14 FOR MTG
Once MTG finds a well endowed sponsor, it will skyrocket!
TIME TO BUY MTG
MGIC IS WELL POSITIONED IN PMI INDUSTRY FOR MOVING AHEAD IN 2020.
The price is low!
THE REDUCTION IN CLAIMS ~ $5.5 MILLION SAVINGS FOR Q4
Using the average claim rate so far in 2019 $45.06K, times 123 claims equals $5.5 million.
The INSURANCE IN FORCE keeps increasing which will add revenue but, the premiums revenue is based on the premiums yield, which is hard to guest.
MGIC PAID CLAIMS DECLINED IN Q4 2019 TO 922 FROM
1045 IN Q3
Paid CLAIMS CONTINUED declining in Q4 BY 123. Recent reports by "BLACK KNIGHT" HAVE STATED WE ARE NOW Seeing a trend of RECORD breaking LOW foreclosures as well.
INSURANCE IN FORCE ACCELERATES IN Q4 BY $4.6 BILLION vs $4.2 IN Q3 2019
INSURANCE IN FORCE and DELINQUENCY INVENTORY both reversed normal seasonal TRENDS in Q4 2019. INSURANCE IN FORCE, $222.7 BILLION, surpassed Q3 in growth and DELINQUENCY INVENTORY turned in better result ending at 30,123.
THE BETTER SALES GROWTH MAYBE Attributed to the new CEO, TIMOTHY MATTKE. MGIC INVESTMENT appears to be changing its strategy to "SALES GROWTH" vs PAT SINKS who focused on Rebuilding MGIC'S "FINANCIAL STRENGTH".
Certainly sales growth will now lead MGIC TO GREATER FINANCIAL STRENGTH but, they won't have to issue STOCK or INCREASE financial leverage.
PMI INDUSTRY ECONOMIC BACKDROP GREAT, PE AVG. 9.36 vs. S&P 500 24.41
https://www.multpl.com/s-p-500-pe-ratio
MTG NEAR-TERM TARGET PRICE $16.75
Q4 2019 EARNINGS Results estimated:
Based on higher INSURANCE IN FORCE and RECORD low defaults and paid loans based on MGIC INVESTMENT Monthly Operations SUMMARY REPORTS. I LOOK FOR 2019 Net Income WELL NORTH OF $1.80 per share.
•MGIC STOCK PRICE IS UNDERVALUED RELATIVE
TO OTHER PMI COMPANIES GIVEN IT'S PE
RATIO
•MTG IS UNDERVALUED GIVEN IT'S STEADY
EARNINGS HISTORY
•MTG IS UNDERVALUED GIVEN IT'S 24 cent annual PER SHARE DIVIDEND APPROXIMATELY 1.75%
YIELD.
MTG PE RATIO is the lowest of Essent Guaranty, Radian, NMI HOLDINGS and when compared to The S&P 500 COMPANIES. Average PE FOR PMI SECTOR IS 9.36.
MGIC'S VALUATION is the highest when compared OTHER PMI COMPANIES AND, to the market as a whole.
The TARGET price could change if higher quarterly earnings are reported for Q4 2019 and that's why it's a NEAR-TERM ESTIMATE.
GOOD DAY TO BE IN PMI BUSINESS: APPS RISE, RATES DOWN, HOME PRICES RISE
Sun is shining on PMI BUSINESS AS STARS ALIGN.
NOVEMBER HOME PRICES HIGHEST IN 10 MONTHS
http://www.mortgagenewsdaily.com/01082020_corelogic_hpi.asp
MORTGAGE NEWS DAILY
BY: JANN SWANSON
Mortgage Applications Start Year on Positive
Jan 8 2020, 5:54AM
"The Mortgage Banker Association's (MBA's) offices were closed over the two-week holiday period. The data in this week's report on mortgage applications activity is compared with that from the last published report covering the week ended December 20.
MBA's Market Composite Index, a measure of mortgage loan application volume was down 1.5 percent on a seasonally adjusted basis compared to the previous report. On an unadjusted basis, the Index was 22 percent lower.
The Refinance Index was down 8 percent from the last report while remaining elevated from the same week a year earlier by 74 percent. The seasonally adjusted Purchase Index increased 5 percent although it was down 14 percent on an unadjusted basis from the December 20 period. Purchase applications were 2 percent higher than the same week one year earlier."
MARKET MTG TIGHT FOR SHARES AHEAD OF Q4 RESULTS
MARKET PLAYERS are trying different gyrations to shake loose MTG SHARES as EARNINGS RESULTS APPROACHES but, have little luck, as investors hold tight to MTG and MTG DAILY VOLUME DECLINES FURTHER.
At first it appeared that holiday trading may have been responsible for LOW volume but, no...
Meanwhile, MARKET PLAYERS are losing even More with unsuccessfully pushing MTG lower then trying to quickly. BUY SHARES FROM any shareholders tricked BY the moves.
MTG NEAR-TERM TARGET PRICE $16.75
Q4 2019 EARNINGS Results estimated:
Based on higher INSURANCE IN FORCE and RECORD low defaults and paid loans based on MGIC INVESTMENT Monthly Operations SUMMARY REPORTS. I LOOK FOR 2019 Net Income WELL NORTH OF $1.80 per share.
•MGIC STOCK PRICE IS UNDERVALUED RELATIVE
TO OTHER PMI COMPANIES GIVEN IT'S PE
RATIO
•MTG IS UNDERVALUED GIVEN IT'S STEADY
EARNINGS HISTORY
•MTG IS UNDERVALUED GIVEN IT'S 24 cent annual PER SHARE DIVIDEND APPROXIMATELY 1.75%
YIELD.
MTG PE RATIO is the lowest of Essent Guaranty, Radian, NMI HOLDINGS and when compared to The S&P 500 COMPANIES. Average PE FOR PMI SECTOR IS 9.36.
MGIC'S VALUATION is the highest when compared OTHER PMI COMPANIES AND, to the market as a whole.
The TARGET price could change if higher quarterly earnings are reported for Q4 2019 and that's why it's a NEAR-TERM ESTIMATE.
Q4 POSITIVE * FORECLOSURE RATE LOWEST ON RECORD - BLACK KNIGHT FIRST LOOK
"Black Knight’s First Look: Seasonal Decline Pushes Foreclosure Starts to Lowest Level on Record; Foreclosure Rate Hits 14-Year Low
- November’s 33,500 foreclosure starts marked a 26% year-over-year decline, and the lowest monthly
volume since Black Knight began recording the metric in 2000
- The national foreclosure rate also fell by 3% from October to hit its lowest level since 2005
- Delinquencies rose seasonally in November, but remain nearly 5% below last year’s level
- Prepayment activity fell 19% from October’s six-year high due to both seasonal declines in home-sale-
related prepays as well as higher interest rates impacting refinance incentive
- Despite the pullback, prepayment activity remains 123% above this point last year
JACKSONVILLE, Fla. – Dec. 30, 2019 -- Black Knight, Inc. (NYSE:BKI) reports the following “first look” at November 2019 month-end mortgage performance statistics derived from its loan-level database
representing the majority of the national mortgage market.
Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 3.53%
Month-over-month change: 4.18%
Year-over-year change: -4.72%
Total U.S. foreclosure pre-sale inventory rate: 0.47%
Month-over-month change: -3.31%
Year-over-year change: -9.11%
Total U.S. foreclosure starts: 33,500
Month-over-month change: -23.69%
Year-over-year change: -25.88%
Monthly prepayment rate (SMM): 1.46%
Month-over-month change: -19.06%
Year-over-year change: 122.88%"
2 YR MTG CHART, SEE POST #997
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=MTG+&x=46&y=19&time=9&startdate=1%2F4%2F1999&enddate=7%2F22%2F2019&freq=2&compidx=aaaaa%3A0&comptemptext=RDN+%2C+nmih%2C+esnt&comp=RDN+%2C+nmih%2C+esnt&ma=0&maval=0&uf=0&lf=512&lf2=2&lf3=268435456&type=64&style=350&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=15
Over 2 year period:
0% GROWTH MTG. PE RATIO 7.87
95% GROWTH NMIH PE RATIO 14.1
A 2 YR MTG CHART SHOWS 0% GROWTH - WILL 2020 BE UP
Since, MGIC STOCK PRICE HASN'T REALLY INCREASED IN TWO YEARS, YOU CAN SEE WHY MOST MGIC INSIDERS ARE HOLDING THEIR SHARES, WITH EXPECTATION THAT THEY HAVE TO RISE EVENTUALLY.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=MTG+&x=43&y=18&time=9&startdate=1%2F4%2F1999&enddate=7%2F22%2F2019&freq=2&compidx=aaaaa%3A0&comptemptext=RDN+%2C+nmih%2C+esnt&comp=RDN+%2C+nmih%2C+esnt&ma=1&maval=20&uf=8&lf=512&lf2=2&lf3=268435456&type=4&style=350&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=15
While this chart show a zero percent increase in growth, MGIC INVESTMENT has shown significant improvements in it's operations and the BALANCE SHEET proves that.
An overview of MGIC SIGNIFICANT ITEMS OF OPERATIONS OVER the last two years:
1. $1.3 BILLION net profits Credit Suisse
2. $4.3 BILLION Shareholders Eqity
3. Return on Equity 16.6
4. PE RATIO 7.9, Earnings per share $1.79
5. $12.14 Book Value, an est. $3 increase
6. Repurchased 23.3 million shares of MTG,
13 million shares in 2018 and 7.3
million shares as of September 30,2019.
PENDING HOME SALES INDEX UP 7.4% OVER 2018
BY: JANN SWANSON
Pending Home Sales Index Surges Past 2018 Numbers
MORTGAGE NEWS DAILY
Dec 30 2019, 9:57AM
"Pending home sales bounced back in November, partially recovering from a 1.7 percent decline in October. The National Association of Realtors® said its Pending Home Sales Index (PHSI), a measure of contracts signed during the month to purchase existing homes, gained 1.2 percent in November to a reading of 108.5 from 106.7. The index is now up 7.4 percent compared to the November 2018 PHSI.
The month-over month change was slightly higher than the estimate of 1.1 percent from analysts polled by Econoday. Those estimates ranged from 0 to 1.5 percent. The forecast from Trading Economics was precisely on target for the October to November change, but fell far short of the actual year-over-year increase with a prediction of 5.8 percent.
"Despite the insufficient level of inventory, pending home contracts still increased in November," said Lawrence Yun, NAR's chief economist. He noted that housing inventory has been in decline for six straight months dating back to June 2019. "The favorable conditions are expected throughout 2020 as well, but supply is not yet meeting the healthy demand."
"Sale prices continue to rise, but I am hopeful that we will see price appreciation slow in 2020," said Yun. "Builder confidence levels are high, so we just need housing supply to match and more home construction to take place in the coming year."
Three of the nation's regions saw only small variations in month-over-month activity while the West had a significant increase, rising 5.5 percent from October. All four regions improved on their year-ago numbers."
I HOPE $14.24 BREAK IS FOR REAL THIS TIME
I'd like to see MTG back in $14.30s, strong chance.....eventually, lol
M&A ACTIVITY COULD BOOST PMI COS. SHARES -COMPASS POINT
WITH LOW DEBT TO EQUITY .17 TO 1
RETURN ON EQUITY 18 TO 1
$600 MILLION NET CASH ANNUALLY
9.9 RISK TO CAPITAL - HIGHEST EFFICIENCY RATE
MGIC INVESTMENT IS UNIQUELY POSITIONED TO ACQUIRE SMALLER COMPANY OPERATIONS
"SEEKING ALPHA
DEC 2019
COMPASS POINT ANALYST WRITES
Several mortgage insurers may be holding on to some excess cash in case the Genworth Financial (GNW +2%)-China Oceanwide deal falls apart and Genworth's U.S. mortgage unit come up for sale, writes Compass Point analyst Chris Gamaitoni.
On Monday, Genworth and Oceanwide extended the deadline for the merger, which was originally announced in October 2016, to March 31, 2020, and said the deal would require reapproval from the New York Department of Financial Services, Fannie Mae, and Freddie Mac.
The analyst said he doesn't have any insight into the reapproval status but is "watching closely to see if any developments lead to a disposal of the U.S. mortgage insurance business."
An in-industry consolidation may result in ~75% cost saving, Gamaitoni wrote, as "most applications are duplicative between companies and they have overlapping client bases."
Other U.S. mortgage insurers are: Radian Group (RDN -0.2%), MGIC Investment (MTG -0.3%), Essent Group (ESNT -1%), and NMI Holdings (NMIH -1.9%).
Previously: Genworth and China Oceanwide delay merger for the 13th time (Dec. 23)"
MGIC INSIDERS BUY/HOLD MTG - OTHER PMI'S INSIDERS SELL
Over the last two months employees at Essent Guaranty, NMI HOLDINGS and RADIAN have been selling their shares, resulting in many transactions. The insider sales may have spooked the market.
BUT, my research has revealed, that with the exception of Patrick Sinks and one other employee who on OCTOBER 28, 2019 sold 5000 shares, MGIC INVESTMENT INSIDERS ARE buying and HOLDING AND NOT SELLING THEIR MTG SHARES.
IT IS MY BELIEF THE MGIC INSIDERS ARE HOLDING SHARES WITH EXPECTATION OF HIGHER PRICES.
INSIDERS know more about what is going on inside a company. If, you recall MGIC HAS a new chief executive officer, TIM Mattke who showed impressive growth RESULTS in Q3 2019.
MGIC HAS amassed a significant amount of excess capital, which gives the company a lot of options. For deployment through strategic opportunities.
Bottomline: I am HOLDING my options open/shares along with MGIC INSIDERS.
**Most data for this story was gathered from MarketWatch and Yahoo Finance.
BLACK KNIGHT "DELINQUENCY DOWN 6.9% FROM A YEAR AGO"
MGIC INVESTMENT reported in December a surprise downward trend in delinquencies, breaking a seasonal trend in the fourth quarter when holiday spending is high, when delinquency usually increase slightly.
That trend toward lower delinquencies, is backed by black knight:
https://realestateinvestingtoday.com/national-loan-delinquency-rate-down-6-9-from-2018/
Earning outlook for MGIC looks good for PMI COMPANIES as INSURANCE IN FORCE rising and delinquencies falling in Q4 2019.
MTG PE RATIO 7.96 vs. Industry AVERAGE 9.36 - ZACKS
MTG has plenty of room to run. Price to book 1.19
https://www.zacks.com/stock/news/657870/is-mgic-investment-mtg-a-great-value-stock-right-now
MGIC NET CASH FLOW FASTEST GROWING IN Q3 2019
NET CASH FROM OPERATIONS Q3 2019 PMI COMPANIES
(MILLIONS)
9/2019. . .9/2018 percent %
MGIC . $458 . . .$384. 19.3 up
RADIAN $566 . . $492. . 2.8 up
ESSENT $424 . . $486. (-14.6) down
NMIHDS $87. . . $61. . 42.6 up
Summary:
NMI HOLDINGS up dramatically but, less than 20% of amount of the other three COMPANIES, which is troubling. Growth finance will be hampered without cash infusion by debt or STOCK issuance.
MGIC UP 19.3% to $458 million. They established a quarterly dividend and $200 million share repurchase program.
Radian up 2.8%, not quite sure why so low.
ESSENT GUARANTY down 14.6% which is also troubling, considering the expansion of their business. It could a harbinger of problems going forward.
STOCK BUYBACK PLANS OF MTG BENEFIT FROM CASH FLOW
MGIC INVESTMENT has repurchased STOCK through share repurchase plans for several years. The cash flow will continue to benefit SHAREHOLDERS.
NET CASH FLOW UP 19.6% IN 2019 TO $611MM* v. $663MM* NET INCOME.
While net cash flow from operations increased 19.6%, net income was STEADY as of SEPT 2019.
CASH IS KING because, it is the money left after expenses and other liabilities are paid during the period, ie. Without net cash flow remaining, MGIC would not be able to pay a SHAREHOLDER DIVIDEND, STOCK BUYBACKS etc.
Many investors look to growth in REVENUE and NET INCOME as guiding principles when investing. However, they would be much better to look at NET CASH FLOW as well, when considering the BOTTOMLINE.
CASH FLOW was $458 million for the nine months ending SEPT 30, 2019 v. $383 million SEPT 30, 2018, A 19.6% increase in net cash generated from operations.
NET INCOME was $496MM FOR NINE MOS. ENDING SEPT 30, 2019 and $512MM for 2018 same period.
Data from SEC 10Q SEPT 30, 2019
*$458MM cash flow and $496MM net income projected for FYE 2019
GOOD PRICE TO BUY MTG $14.20ish
MTG has support in here. The trading pattern shows support at 20 day moving average.
The accumulation/distribution line and Chailkin Oscillator show support... as well.
MTG COULD BREAK $14.50
If, the STOCK momentum changes...
TRIPLE TOP BREAKOUT FAILED TRY FOR MTG
After failing to BREAKOUT three times at about $14.50, MTG IS on a downtrend.(see the chartschool dotcom chart for 3 months embedded here: https://investorshub.advfn.com/boards/board.aspx?board_id=15326tv
The Relative Strength Indicator(RSI) is showing lower highs and lower lows, which is powerful because, it is the best indicator of future performance.
The RSI is classified as a momentum oscillator, measuring the velocity and magnitude of directional price movements. Momentum is the rate of the rise or fall in price. The RSI computes momentum as the ratio of higher closes to lower closes: stocks which have had more or stronger positive changes have a higher RSI than stocks which have had more or stronger negative changes.
The macd is bearish showing a crossover below the centerline.
Against the backdrop of an overbought MARKET, I expect a pullback however, longer-term view remains positive fundamentally for MGIC INVESTMENT.
JIM CRAMER HAS BEEN JITTERY LATELY
https://www.cnbc.com/2018/04/03/cramers-top-investing-rules-for-bulls-bears-and-everyone-in-between.html
MARKET CATALYSTS WEAK DAYS BEFORE X-MAS
Caution maybe better virtue...
HOME BUILDERS CONFIDENCE HIGHEST IN TWO DECADES
MORTGAGE NEWS DAILY
BY: JANN SWANSON
Builder Confidence Highest in Two Decades
Dec 16 2019, 10:28AM
Home builders ended the year with an apparent outbreak of euphoria. Responding to higher trending sales and low interest rates they sent the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) soaring to its highest reading since June 1999. NAHB said the December HMI, a measure of builder confidence in the market for new homes, jumped 5 points to 76. The gain was on top of a November index that was revised up from 70 to 71.
"Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market," said NAHB Chairman Greg Ugalde.
"While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability," said NAHB Chief Economist Robert Dietz. "Higher development costs are hurting affordability and dampening more robust construction growth."
Derived from a monthly survey that NAHB has been conducting for 30 years, the HMI asks NAHB's new home builder members to give their perceptions of current single-family home sales and their expectations over the next six months as "good," "fair" or "poor." They are also asked to rate the current traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Responses to all three questions were strongly positive. The HMI index gauging current sales conditions rose 7 points to 84, the component measuring sales expectations in the next six months edged up 1 point to 79 and the measure charting traffic of prospective buyers increased four points to 58.
ZACKS: MTG STRONG VALUE STOCK
MTG looks like an impressive value stock at the moment
"Is MGIC Investment (MTG) a Great Value Stock Right Now?
Zacks Equity Research Published on December 06, 2019
MTG
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.MGIC Investment (MTG - Free Report) is a stock many investors are watching right now. MTG is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 7.80, which compares to its industry's average of 9.36. MTG's Forward P/E has been as high as 8.88 and as low as 6.02, with a median of 7.85, all within the past year.
Another notable valuation metric for MTG is its P/B ratio of 1.19. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.32. Over the past year, MTG's P/B has been as high as 1.36 and as low as 0.98, with a median of 1.20.These are only a few of the key metrics included in MGIC Investment's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, MTG looks like an impressive value stock at the moment."
MBA CITES JOBS AND LOW RATES TREND HELP MORTGAGE APPS
Mortgage Applications Increase in Latest MBA Weekly Survey
Dec 11, 2019
CONTACT
Adam DeSanctis
adesanctis@mba.org
(202) 557-2727
WASHINGTON, D.C. (December 11, 2019) - Mortgage applications increased 3.8 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending December 6, 2019. The results for the week ending November 29, 2019 included an adjustment for the Thanksgiving holiday.
The Market Composite Index, a measure of mortgage loan application volume, increased 3.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 47 percent compared with the previous week. The Refinance Index increased 9 percent from the previous week and was 146 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier. The unadjusted Purchase Index increased 35 percent compared with the previous week and was 5 percent higher than the same week one year ago.
"Low mortgage rates continue to be the trend as 2019 comes to an end, and mortgage applications responded accordingly last week, rising 3.8 percent. The 30-year fixed mortgage rate remained under 4 percent for the fourth straight week, and rates for FHA loans declined close to their lowest level of the year. The decrease in FHA rates led to a 27 percent jump in refinance applications for those loans, and their share of refinance activity - at 14 percent - was the highest since 2016," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Purchase applications were down slightly, but were 5 percent higher than a year ago, which is in line with the gradual growth in the purchase market seen throughout this year."
Added Kan, "The November jobs data showed increased payroll gains and low unemployment, which means conditions remain favorable for steady purchase growth in the coming months."
The refinance share of mortgage activity increased to 62.4 percent of total applications from 59.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.0 percent of total applications.
LOOK LIKE A SHORT SQUEEZE FOR MTG
BUT, I'm not a professional trader...
HOME PURCHASE SENTIMENT NEAR RECORD HIGH
MORTGAGE NEWS DAILY
BY: JANN SWANSON
Home Purchase Sentiment Rebounds to Near Record Highs
Dec 10 2019, 10:21AM
"After a steep dive in October, America's attitude toward buying a home is on the rise again. Positive answers to the question of whether it is a good time to buy on Fannie Mae's November National Housing Survey rose 11 percentage points to a net of 32 percent, 9 points higher than in November 2018 and its highest point since March 2018.
That answer helped drive the Home Purchase Sentiment Index (HPSI) up 2.7 points to 91.5. The index had declined the two previous months but is now up 5.3 points year-over-year and is close to returning to the all time high of 93.8 set in August."
IIF RISES 5.9% TO $220.7 BILLION IN DEC AS DELINQUENT DECLINE -9.9%
INSURANCE IN FORCE(IIF) CONTINUES TO EXPAND RISING TO $220.7 BILLION OR 5.9% ANNUALLY UP $1.5 BILLION FROM OCTOBER 2019 IN NOVEMBER
DELINQUENCIES DECLINED FROM OCTOBER AND YEAR OVER YEAR BY (9.9%) to 30,123 in NOVEMBER 2019
The decline in delinquencies is notable because, last year defaults rose slightly to 33,398 from 33,314 in the October to November period, following a normal seasonal trend of rising delinquencies.
https://mtg.mgic.com/news-releases/news-release-details/mgic-investment-corporation-releases-monthly-operating-30
STRONG DECLINE IN DELINQUENCIES - BLACK KNIGHT
JOB RISE SUPPORT DECLINING HOME DELINQUENCIES FOR PMI COMPANIES -TG.
Monday, November 25, 2019
Black Knight's First Look: National Mortgage Delinquency Rate Decreased in October
From Black Knight: Black Knight’s First Look: Strong Decline in October Mortgage Delinquencies; Refi Wave Pushes Prepayments to Highest Level in More than Six Years
• The national delinquency rate fell to 3.39% in October, a nearly 7% decline from last year, and within 0.03% of the record low set in May 2019
• Serious delinquencies fell by 10,000 from September, while the number of loans in active foreclosure edged up slightly (+3,000)
• Prepayment activity climbed another 16% in October to the highest level since May 2013
• Prepays are now up 134% year-over-year as refinancing homeowners continue to take advantage of low interest rates
• However, modest rises in 30-year rates in recent weeks – coupled with seasonal slowing in home sales – may dampen prepayment rates in coming months
According to Black Knight's First Look report for October, the percent of loans delinquent decreased in October compared to September, and decreased 6.9% year-over-year.
The percent of loans in the foreclosure process increased 1.0% in October and were down 6.2% over the last year.
Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 3.39% in October, down from 3.53% in September.
The percent of loans in the foreclosure process increased slightly in to 0.48% from 0.48% in September.
Black Knight: Percent Loans Delinquent and in Foreclosure Process
Oct
2019 Sep
2019 Oct
2018 Oct
2017
Delinquent 3.39% 3.53% 3.64% 4.44%
In Foreclosure 0.48% 0.48% 0.52% 0.68%
Number of properties:
Number of properties that are delinquent, but not in foreclosure: 1,786,000 1,854,000 1,884,000 2,262,000
Number of properties in foreclosure pre-sale inventory: 255,000 252,000 267,000 348,000
Total Properties Delinquent or in foreclosure 2,041,000 2,106,000 2,152,000 2,610,000