Skip to main content

Paul Price Likes This Play on Inflation

Private Mortgage Insurer Essent is benefiting from surging housing prices.
  • Author:
  • Publish date:

It is not true that the Mandarin language uses the same word for crisis and opportunity. This is a mistranslation that, nevertheless, hits on something very true. Every crisis is a moment of change, and change always presents its own opportunities for the savvy and smart investor.

Paul Price sees exactly that kind of opportunity in the current inflation. He writes:

“Essent Group Ltd.   (ESNT) - Get Essent Group Ltd. Report is a leading provider of private mortgage insurance (PMI). PMI is needed by anyone purchasing a home with less than 20% down."

"How is Essent a play on rising prices?" Price asked recently on Real Money. "Real estate transactions have been trending ever-higher over the past couple of years, both on absolute volume and pricing of properties."

TheStreet Recommends

Price continued: "As home values continue escalating there are fewer buyers able to come up with 20% down payments than ever before. That triggers increased purchases of PMI. Higher home prices also mean policies are written for larger dollar amounts of coverage."

That's two trends that work in Essent's factor. 

In addition, "ESNT's first full year as public company was 2014. Its growth record since has been quite impressive. Every major business metric is likely to hit an all-time record in 2021. Even better results are expected in 2022 and beyond."

Price added that, "Better still, while continuous shareholders more than doubled their money, that percentage gain pales in comparison with the true value already created. That implies a serious ‘catch-up’ move to the upside is statistically almost certain to occur.”

Get more trading strategies and investing insights from the contributors on Real Money.