) -- Shares of

MGIC Investment Corp.

(MTG) - Get MGIC Investment Corporation Report

, a Milwaukee-based mortgage insurer, continued to rebound on heavy volume Thursday following an analyst upgrade.

Keefe, Bruyette & Woods analyst Nathaniel Otis lifted his rating on the stock outperform from market perform late Wednesday, noting a sell-off earlier in the week on news of the

company's plans to sell $1 billion worth of stock and convertible senior notes

had sent the stock 30% below his new 12-month price target of $15 (up from $12). Otis also cited improving trends at the company and said its first-quarter results were better than he expected.

MGIC announced the capital raise, along with the first-quarter results on Tuesday, and its stock fell more than 12% to $11.06 The next day, it disclosed the common stock being sold in the offering had priced at $10.75, a 15% discount to where the stock had closed the previous Friday, but that was apparently not as great a discount as the market was anticipating, as the stock regained some ground to finish Wednesday at $11.25 on volume of more than 90 billion, well beyond its usual churn.

Inspired by the KBW upgrade, the shares were recently changing hands at $11.60, up 3.2%, just ahead of the close. The stock opened sharply higher on Thursday and it peaked at $11.98 around midday. Volumes of 25 billion shares was more than triple the issue's trailing three-month daily average of 7 billion.

Other mortgage insurers were also higher, though by a smaller percentage on average volumes. These included

Radian Group

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(RDN) - Get Radian Group Inc. Report

, up 2.56% to $18.04 and

PMI Group

( PMI), up 1.86% to $6.56.

Mortgage insurers have had a huge rally in recent months as the federal push to get banks to

bail out homeowners

sharply reduces their potential liabilities. MGIC, Radian and PMI Group are all up more than 100% since the start of the year and several multiples of that in the last 12 months.

Not all analysts are quite as bullish on MGIC following the first-quarter report and capital raise, however. In a report published Wednesday, FBR Capital Markets analyst Steve Stelmach wrote that while he views the additional capital as a positive for the company, "it does limit the potential upside in shares had

MGIC been able to manage the current crisis and reach a point where it could have harvested future premiums on the existing book without the added share count."

Stelmach left his price target for MGIC at $13 but dropped his earnings estimates for future quarters. He now sees MGIC losing $2.95 in 2010, as opposed to the $2.15 loss he had forecasted previously.

On Tuesday, MGIC reported a loss of $150.1 million, or $1.20 per share, for the three months ended March 31, narrower than its year-ago loss of $184.6 million, or $1.49 per share.


Written by Dan Freed in New York