Trade-Ideas LLC identified MGIC Investment ( MTG) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified MGIC Investment as such a stock due to the following factors:

  • MTG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.7 million.
  • MTG has traded 5.0 million shares today.
  • MTG traded in a range 209.8% of the normal price range with a price range of $0.49.
  • MTG traded above its daily resistance level (quality: 41 days, meaning that the stock is crossing a resistance level set by the last 41 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on MTG:

MGIC Investment Corporation, through its subsidiaries, provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. MTG has a PE ratio of 3. Currently there are 3 analysts that rate MGIC Investment a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for MGIC Investment has been 6.0 million shares per day over the past 30 days. MGIC Investment has a market cap of $2.4 billion and is part of the financial sector and insurance industry. The stock has a beta of 2.45 and a short float of 9% with 6.36 days to cover. Shares are down 22.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MGIC Investment as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 11.1%. Since the same quarter one year prior, revenues slightly increased by 7.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, MGIC INVESTMENT CORP/WI's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • MGIC INVESTMENT CORP/WI has improved earnings per share by 26.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MGIC INVESTMENT CORP/WI increased its bottom line by earning $2.62 versus $0.64 in the prior year. For the next year, the market is expecting a contraction of 66.4% in earnings ($0.88 versus $2.62).
  • MTG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.58%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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