HOW TO PLAY IT
According to Bose George
It’s unlikely the booming mortgage market will keep up the frenetic pace it hit during the pandemic. Investors have already lost enthusiasm for originators like Rocket Mortgage and United Wholesale Mortgage, which have both sold off in 2021. But the trillions in home loans made in 2020 present a good opportunity for mortgage
insurers, which guarantee lenders in the event a borrower can’t make his payment.
Mortgage insurance is needed for borrowers without the typical 20% down payment. According to Bose George, analyst at Keefe Bruyette & Woods, soaring home prices have benefited companies like MGIC Investment Corporation, which targets borrowers with prime credit
scores. It’s currently trading at a book value of $14 with a 1.68% dividend yield; George says fair value is closer to 1.3 times book, or a 30% gain. “Even if the multiple doesn’t improve, you’ll get a doubledigit return just from book-value growth,” he says.