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Radian Group Inc. Message Board

  • mrfabulous_00 mrfabulous_00 Sep 18, 2012 7:48 AM Flag

    Im short RDN for one main reason...

    In looking at SA's last presentation, I noticed that the 12 month plus old delinquencies (defaults) which cure at a 3% rate are reserved at $26,000 per delinquency. I remain convinced that the approriate reserve factor for 2, 3 and 4 year defaults which is a substantial amount of that inventory should be closer to $48,000 to as high as $54,000.

    I mean I see guys like Rima putting 20% of their portfolio in this name and this analysis is so elementary it is frightening. If Im an LP there, and they are wrong...I mean wow. So, I think RDN is close to $800 million under-reserved which obviously would make them insolvent from a stat capital standpoint. I also belive that the independent actuaries will be sued. The last item is the FG business, $41 billion of risk on $1.2 of capital. Sorry but that is an accident waiting to happen. They have done a masterful job of whittling down that risk, but the odds are now they have sucked up as much capital out of it as possible and the dividend to Mortgage are just not going to be enough.

    Sentiment: Sell

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    • Hard to argue with any of this. Winter seems to have the best approach right now. Hold for a little more upside, but sell before earnings and see how it shakes out. What's the probable timing on this "other shoe" dropping? This upcoming qtr? Next qtr?

    • Did you really go short mrfabulous?

      Sentiment: Strong Buy

    • NONE of the hedge funds have been right on these names, some have made some short term gains, but think of all the funds that have been in these losers: Bass, Cooperman, Paulson, etc, all wrong.

      Sentiment: Strong Sell

    • With all due respect mrfabulous. all the data you gathered are telling you all the negative side of RDN and I tend to agree with that. In the other side, have you consider some like; NIW is rising, delinquency data are going down every month, foreclosure are sinking, Housing market are on the rise, Mortgage interest are in the lowest of the low, government help are available, Dow Jones is heading to 1400.. All these things will give RDN a boost and will reach a profitability in the near future. Yes, business like RDN will supper under reserve due the substantial lost in the housing market several years ago, including all these bad financial deal you have mentioned above. I does not mean RDN will stay in there or going to BK. Yes it is very risky but there is demand for RDN product and and services to survive. There is a saying "no gut's no glory". If you think it is good to short so be it and congratulation. Long or short is part of the game here. See you in the $6/s at the end of the year. Thank you for your analysis, I'll save it just in case you are right. Good day mrfabulous.

      Sentiment: Strong Buy

      • 1 Reply to bernie02
      • and none of that matters if they go BK on past claims

        if they're highly under reserved... or if all their falsely denied claims surge from pending back onto income statement one quarter, then're in for quarter as bad or even worse than MTG's Q2

        don't misuderstand.. i am fairly long and bullish on RDN and also MTG... but I am very concerned about whether they're really prepared for the true size of their past claims. and i've yet to see a good reply from bulls about it.. the replace is always about NIW or operational stats, as if that some how magically turns into cash -- and enough cash to solve all their past claims. bulls like to tear apart that Seeking Alpha article but I haven't yet seen anyone really reply to it with as many specifics -- and they always say the future is better, never actually say why so many of his numbers are wrong (specifically, I would love to see a better argument for why they are properly reserved per delinq, and why their pending claims to claims ratios is not a large concern).

        again, I am long on the stock. but I'm worried, too, and I'll likely sell right before Q3 and re-buy after (maybe I miss out on 10-20%.... but I'm happy with my profits so far, and I'm not risking a 60% MTG esque drop for a 10-20% gain, when I can re-buy early that morning and still likely ride the long for the rest of the quarter).

        again, i want to be even more bullish on RDN. but i really need to see better arguments with a lot more stats backing them up than simply NIW/delinqs/housing are improving -- I wish more bulls would address all their past reserves and pending claims and denied claims in much greater detail.

        p,.s. my position says hold because i don't think i'd buy at these levels... i'd either hold until Q3, and only buy if we get a 10-15% or greater pullback before.

        Sentiment: Hold

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