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Mortgage Insurers Radian MGIC Touted By Goldman for 2014

Stocks in this article: MTG RDN

NEW YORK (TheStreet) -- Mortgage insurers Radian Group (RDN) and MGIC Investment Corp. (MTG) presented at the Goldman Sachs financial conference Wednesday and Goldman analyst Eric Beardsley continues to recommend both stocks in a report published Thursday.

Shares of mortgage insurers were pummeled following the subprime crisis as some were forced out of business though the remaining publicly listed names have come roaring back. Shares of MGIC are up nearly 900% since Aug. 10 2012, while Radian shares are up nearly 400% over the same time period.

Radian shares were gaining 1.2% to $14.08 while MGIC shares were up 1.7% to $8.32 in mid-day trading.

Both Radian and MGIC expect to be able to meet new capital requirements from the Federal Housing Finance Authority, according to Goldman's report. The two companies also looking to gain market share as their chief competitor, the federal government, looks to reduce its role in insuring mortgages.

"Management recognizes that no private mortgage insurer has sustained 25%+ market share for an extended period in the past and that they could lose some share to new entrants, but they are operating from a position of strength. We model the company's market share declining from 27% to 24% over the next few years," Goldman's analysts wrote of Radian Group.

In reiterating their "buy" on the stock, the Goldman Sachs analysts wrote that "we think normalized earnings could be closer than the market expects as losses on legacy loans decline and the industry regains market share from the FHA."

Their rationale was almost identical in reiterating their "buy" on MGIC, which is also on the Goldman "conviction list." While Radian trades at 2.52 times book value versus 8.39 times book for MGIC, MGIC trades at two times revenues versus nearly three times revenues for Radian.

-- Written by Dan Freed in New York

RDN Chart data by YCharts

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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