1) The moves up are on huge relative volume, the moves down are on light relative volume
2) It just moved up 20% on a negative news day. Mortgage applications are down 9.7% this week and at the lowest level seen since 1996. The worst has been factored in.
3) Best of the breed. RDN has the smartest risk management in the business. They also seem to find a way to make money when nobody else can. They are not pigs or gamblers like some of the other industry management and have always been very conservative and mathematical people.
4) Insider buying. Take a look at the last time these insiders sold, it was over $60 a share. They sell at the peak and buy near the bottom. They are also all super conservative people by nature. Look into them, study their bios.
5) QRM definitions will be changed. Too much opposition against it from too many people and politicians. Private MI works and will not be thrown under the bus.
6) Peak delinquencies have been reached and the capital ratios reached a peak last quarter. It can't get any worse for RDN (even if it gets worse sector wide). Ratios will improve as the new business written is much more carefully contrived. Payout claims are also proactively being challenged and re-challenged for mortgage fraud.
7) Every time in the past 3 years that RDN has reached this level it has bounced back 300%+ within a few months, sometimes less. History will repeat itself again.
8) RDN is diversified and well capitalized and will benefit the most from PMI's (and maybe soon MTG's) lack of ability to write new business. Clearly the trend is up with regards to RDN writing new business month over month and they continue to be the most aggressive in the space.
9) FHA loans will trend down and the conventional MI insured loans will naturally trend up. The trend will move away from government intervention. Long term RDN will get back over $20. I'd say by the end of 2013.
10) Industry consolidation. S.A. sounds pretty confident during the last CC when the Goldman Sachs analyst asked about consolidation rumors: "Donna, as you know very well, I can't comment on anything in the way of discussions that may be occurring or not occurring. All I can tell you, that we at Radian have demonstrated in the past our open-mindedness, and we believe we are strongly positioned financially to participate in those opportunities as they may come up in the industry if they make sense for our shareholders."
Strong buy at this level. Picking the bottom is as pointless as it was in March 2009 when it ran up 1500% in 6 months. Whether you are in at $1 or $2 or $3, the most important thing is that you are in. Sometimes having a smaller stake at a higher average makes you more money as you end up holding it longer, not tempted to cash the quick 50% move and missing the other 1000%. Feel free to add to this list of reasons. GLTA.
I expect the company to give more color regarding the captial issue on Tuesday of next week. What I would like them to do is buy back the current debt at a big discount and then do a combination offering of convertible debt that dilutes the common no more than 20% but offers a callable feature for the next five years which will give the company time to earn its way out of this economy. Stock price is trading at a ridiculous level along with the debt.
They would need to do a $750mm zero coupon convert, guaranteed to pay @$7.00/sh., due in 5 yrs. Would be fab. for the Co. if they could find a reputable underwriter[ I guess that's an oxymoron] willing to do it.
Wishful thinking of 7 bucks unless we get some great economic news regarding the housing market...not going to happen. 3.5 is the max that I see to year end. Capital. continues to be the biggest uncertainty regarding the company. Its need to be able to continue to write new insurance and I think it will be able to but MGT need to reassure investors that they have enough capital to operate.
These results should help the overall market a bit. The street had RDN pegged to report like MF Global, and couldn't be more wrong. I just read the whole report and for a $2 stock, RDN is in pretty good shape. Given fair value of the S&P at the moment and financial companies in general, RDN should be trading at around $6 right now. The rate that they are growing the MI business is incredible. Expecting well over $5B in new insurance written next for Q3. They will exceed MTG as #1 in the space and they have a FAR better risk portfolio. Not that I need to repeat myself 100 times here, but best management in the business.
This stock is stuck. Charts mean nothing. It would be great to see RDN at $7 by December. Right now I would be happy with $4. We are now in our 6th trading day down. There is nothing I've seen that can propel this stock and I'm not sure earnings will help even if good. MTG reported garbage earnings and RDN takes a bigger hit. Same as last earning quarter. RDN has reported decent earnings the past two quarters but the overall sentiment on the MI Industry is negative. Last year at this time they reported good earnings and we went about $10 then they diluted the stock and it has never recovered. It would be nice to see a repeat of last years run-up but think if that happened everyone would sell their shares. So for me, its just a hold until everything settles down. Lets hope next Tuesday is really good news. We need it.
The Piper Jafray analyst basically reiterated my post and price target today... Maybe he reads here?
A report from Piper Jaffray reiterates its Overweight rating and $7 price target on Radian Group (NYSE: RDN).
The report states, “Overall, we anticipate modest growth of new insurance written along with stable incurred losses due to modestly improving credit trends. Over the next 12 months, as headwinds subside we see shares outperforming”.
I forsee an imminent move here as RDN moved up on some bad mortgage data today on relatively light volume. Last time it did that it popped 50% within a few days. GLTA.