NEW YORK (TheStreet) -- MGIC Investment Corp. (MTG), a Milwaukee, Wis.-based mortgage insurer, saw shares jump 12.39% Monday to close at $1.27 on volumes of 9.7 million shares compared to average daily volumes of 5.5 million shares over the past three months.
MGIC shares have rebounded in recent days after losing 64% of their value Aug. 2 following what FBR Capital Markets analyst Steve Stelmach referred to in an Aug. 3 downgrade of the company as an "unexpectedly large" second quarter loss. Stelmach dropped his recommendation to "market perform" from "outperform" in that report. Shares have nearly doubled, however, since hitting a 52-week low of $0.66 on Aug. 3.
Stelmach argued in the note accompanying his downgrade that the negative earnings surprise from MGIC added to questions over "the lack of visibility on a number of persistent regulatory and legal issues facing MGIC." His previous bullish view on the company was based on a notion that MGIC was stronger than other publicly-traded competitors and that the company would slowly work its way to profitability in a relatively short period of time. The second quarter results, however, "call both of those pillars into question," he wrote.
Despite that disappointment, an Aug. 8 report from Credit Suisse noted decreasing defaults from MGIC in July and a $200 million increase in new insurance written , raising the total to $2.4 billion--an almost 85% increase since February. Credit Suisse has a "neutral" rating and a $2 price target.MGIC competitor Radian Group (RDN) also saw shares rise Monday--by 3.55% to $3.21. While Radian's volumes were just slightly above average, most stocks traded well below average volumes since trading activity tends to be light in mid-August. Both MGIC and Radian would benefit from a housing recovery, hopes for which were recently bolstered when Fannie Mae (FNMA)and Freddie Mac (FMCC) both posted second quarter profits. Indeed, both government sponsored entities have seen increased prices and volumes for their shares since they released their earnings. Freddie Mac shares gained 2.61% Monday to close at above 29 cents, while Fannie Mae shares rose 6.4% to 30 cents. Still, in order for those shares to have any value, the preferred shares, which ceased paying dividends in 2008 and trade for just a fraction of their original value, would have to be fully repaid.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV