Previous mortgage insurer rallies in 2009 and 2010 evaporated as losses from policies sold before the crisis persisted. Radian closed above $18 in 2010 and MGIC above $13.
Leon Cooperman’s Omega Advisors Inc. disclosed a stake of more than 5 percent in mortgage-guarantor PMI Group Inc. that year. At the time, Cooperman said the company was a “survivor.” PMI filed for bankruptcy protection in 2011.
Housing Recovery
This time the housing market’s strength will support the shares. The insurers are operating in a housing recovery that’s strengthening as the job market improves and the Federal Reserve pushes borrowing costs for mortgages to near record lows. The unemployment rate fell to a four-year low of 7.5 percent in April, according to Labor Department data.
“Mortgage insurers are all experiencing improving fundamentals, as their performance is tied to the housing recovery, and should offer considerable upside if recent positive housing trends continue,” Paulson & Co. said in a letter to clients obtained by Bloomberg News in April. “Certain types of insurance companies are currently trading at low relative valuations and should offer considerable upside.”
Paulson said Radian can reach $20 per share by 2015. The fund also has stakes in MGIC and Richmond, Virginia-based Genworth, which backs mortgages and sells life insurance and long-term care coverage.
Soros Buying
Soros Fund Management LLC took a 2.8 million share stake in Radian as of March 31. Perry took a stake of about 9 million shares of MGIC, and Blue Ridge added 5 million, bringing its holding to 14.9 million shares.
Spokespeople for Paulson, Maverick and Blue Ridge, which is run by John Griffin, declined to comment on the share purchases. Blue Ridge, which manages $7 billion, and Maverick, are so- called Tiger Cubs that trace their roots to Julian Robertson, founder of Tiger Management LLC.
Michael Vachon, a Soros spokesman, and Mike Neus, general counsel at Perry, didn’t respond to messages seeking comment.