Wednesday, November 5, 2014
Ever since Fannie and Freddie priced themselves out of the private mortgage insurance market, it has been a feeding frenzy. Both Radian and MGIC have leveraged up with equity offerings to expand their market reach to take advantage of the new market opportunities. Radian has started to significantly benefit from that investment. previous post that Radian was already showing decreasing deliquency trend that was ahead of Wall Streets valuation. In Q3 of 2014, Radian actually doubled analysts earnings estimates for the stock. Based on earnings this year Radian is selling at less than 10 times earnings. Extremely cheap for a market leader. Not to mention this is the value when home sales are still way below historical mean. Also home lending credit is tight and in the process of loosening, which will bring an increasing amount of customers to use mortgage insurance. The kids say "Radian is rad!" The author of this blog will buy RDN May 2015 $17 Calls and sell RDN May 2015 $18 calls for a net cost of $.34. $.34 down side, $.66 upside.