MBIA Shares Jump as Davis Ups Stake

MBIA(MBI Quote) surged more than 12% Wednesday after Davis Selected Advisers bought a substantial stake in the Armonk, N.Y.-based bond insurer.

The Tucson, Ariz.-based money management firm significantly increased its holding to 6.4 million shares, or a 5.1% stake in MBIA, according to a Schedule 13G filing with the Securities and Exchange Commission. Schedule 13G filings typically denote that the investor intends to take a passive stake in a company.

Davis, which manages $100 billion in assets, had owned 481,021 shares of MBIA as of Sept. 30, according to SEC filings. The firm's full stake is now valued almost $129 million, as of Monday's closing price of $20.12.

The news comes just two days after Merrill Lynch(MER Quote) said Davis and Temasek Holdings, a Singaporean state-owned investment company, plans to invest a combined $6.2 billion in the troubled brokerage firm to help it shore up capital as it braces for more writedowns on its collateralized debt obligations, or CDOs, this quarter. Davis plans to purchase $1.2 billion in Merrill's common stock over the next few weeks.

Like Merrill, MBIA's stock has been hit hard as a result of the credit crunch. Investors are increasingly concerned that the credit market woes that have roiled financial markets in the second half of this year will intensify with the potential default or credit rating slide for a financial guarantor.